Single Loan on Multiple Properties

[Bill F.]

I'm looking for BP's ideas and thoughts about the pros/cons of financing multiple properties under one commercial loan. 

I hold one investment property in an LLC and I focus on sub $100k town homes so up until this point I have been able to purchase for cash. I have an opportunity to buy a few more units via short sale using either my own funds and/or hard money. I have always planned on getting a loan on the properties to increase return and free up capital and would rather get one loan as opposed to multiple. I have reached to some banker and they've told me to call them when I have the properties.

For the bankers out there: how common is it to make these loans and what requirements do you usually have? Is it a min loan amount or min property number?  Also, how is the sale of one property handled? 

For the borrowers: would you recommend doing a loan this way? Why or why not? If so, what do you wish you knew/did differently? 

Any ideas or thoughts are appreciated!

[Andrew Postell]

@Bill F. while this loan type does exist I wish people wouldn't talk about it as if it's a readily available product for everyone to use. The "blanket" loan type was designed to package multiple homes together and sell the entire package to investment firms. So if you are buying a package of 200 homes for your REIT, then keep the financing in place with a blanket loan to easily buy and sell the portfolio. Don't get me wrong, these loans can be used by other people but there are some pretty important items:

1. Most of these blanket loans start at a $1,000,000 minimum total property value.  Meaning your entire package will need to be work $1million.  You might be able to find a very small, community bank type of bank that might lend you a miniature-blanket loan to you but these banks are hard to find...and they will probably want a track record of lending to you first to feel comfortable with a different loan type.  That means that all of your loans will carry a "portfolio" rate (higher rate or variable rate).  If you do find a bank like this make sure and keep their contact information handy.  They are great banks for non-conventional loan properties. 

2.  You cannot break up the package.  If you sell one property, you will have to refinance every property over again...and pay all the costs again of refinancing.  If you have this product make sure you have a long term approach with a proper exit strategy.

3. Costs - there are a few costs that you will save money on but for the most part the costs of doing the loan are the same.  Each property will need to be appraised.  Title insurance is a percentage of the loan on every deal...so title insurance fees are the same as if they were separate. 

The best rates and terms on investment properties are with conventional loans.  On your first 10 I think most would suggest for you to try to qualify for those loan types and then branch into other loan types.  If you have more questions on this then feel free to ask.  Thanks!