rental loans hurt my persoanl credit worthiness

[Don Chambers]

How can I finance my rentals without it hurting my personal ability to get a loan?

I have 20 rental properties. One is owned free and clear, 4 have conventional 30-yr fixed loans, and the other 15 have 3-year commercial balloons with local banks. So far, I have had no problem rolling the loans over when the balloon is due.

Today I was turned down for a car loan with a credit union because of the number of mortgages I have (they only mentioned the number – no debt-to-income issue). In the past, I had trouble refinancing my personal residence because of the number mortgages I have. I have even been turned down for a credit card because of these loans.

When dealing with the commercial loans, and a bank’s business department, I don’t seem to have any problems. They know how to analyze my income, adjust for depreciation, etc. But when I try to get any type of non-commercial loan (car, personal residence, credit card, etc.) I have problems.

I have very little personal debt. I have a lot of debt on the rentals but they cash flow. I have saved up over $70k in my rental property bank account. That sounds like a lot, but it will only pay off one or two of the properties. I prefer having the cash cushion.

I find that it is very difficult to get a conventional loan when you have more than 4 mortgages, and impossible after 10.

One idea is to get a blanket mortgage where I have one mortgage covering several properties. If I can reduce the number of mortgage perhaps I can get a few more 30-yr fixed and increase my cash flow. (I really don’t like short-term financing on a long-term investment).
Does anyone know where to get a blanket mortgage?

Are there any tactics for getting these rentals off my personal credit report?
I know I am responsible for the loans, but they are handled by my rental LLC. It would be good if could confine them to the LLC so they do not interfere with my personal situation.

Any ideas?

[Chris Martin]

@Rob K. 

The loan person at the bank will listen to this and say 'I think we can do this.' After all there are only 3 loans on your credit report. You will go through all the hoops and balance a pencil on your nose for 30 seconds as required, and the your bank guy will ship off the package. The underwriter will ask 'do you have any interest in LLCs?' and 'do these LLCs own property that is financed?' Two 'yes' answers and they will add in the newly minted 5 loans. For single member LLCs and for multi-member LLCs where you may have a small (but non-zero) interest, they add 1 to the count of mortgages held. Their wording: "Joint or total ownership of a property that is held in the name of a limited liability company (LLC) or partnership." There are a few exceptions: raw land, timeshares (vacation??), mobile homes that are not permanent, 4+ (commercial loan) property, and (doesn't apply here, but interesting anyway) S-Corp owned and financed property.

So you would be at 8 (3+5) financed properties by their count, not including your personal residence, which is less than 10... and that would (as far as I can see) "...comply with the eligibility, underwriting, and delivery requirements described..." in eligibility section B2-2-03.

I would consider this option only if the collective refinancing activity has material benefits. There are other loan considerations (DTI, cash reserve requirements, etc.) that are beyond the number of financed properties, but the commercial lender may not follow the same underwriting guidelines as a FNMA/GSE loan. I'd make sure to get a few other set of eyes on it (like the bankers) to make sure all other eligibility requirements are met.

Reference: B2-2-03, Multiple Financed Properties for the Same Borrower ( pg. 254-257)