All Forum Posts by: Charles Burgess

One upside to me would consistent rent scale, meaning if you upgrade one unit early, you set the table for all of the units when done because they are all the same. Are they all the same square footage also? Are any one plus an office or all the same?

One drawback is overpopulation of units. Sometimes when only one bedroom is available, people fake and squeeze to fit and you end up with over-occupancy.

It's really a product of your market. Within that area what does your demographic research tell you about the age range? The lower the median age for the area, the better 1/1 will be.

I've done several blanket loans over the years.  They stink - pure and simple.  Why not refi them individually with the same lender or a couple of lenders. Most blanket loan lenders will allow you to do partial releases so you could sell one at a time. Usually, they allocate a certain percentage of the loan to each house when you initially close your loan - based on values but then they also add a premium for the release so you're paying 110 or 120% of the allocation of the loan when you sell..

So lets say you have 4 houses and three of them are worth 100k and 1 house is worth 200k. Thats 500k in value and lets say they give you a loan for 400k.  They then allocate 80k to each of the three houses for the loan and 160k to the fourth one. That means 20% of the loan to the lesser valued houses (3) and 40% to the higher priced home (1) for a total of 100%.

When you sell one of the houses, you typically have to pay 110 to 120% of the allocation loan percentage based on current principal.  Lets say its 5 years later and you paid the 400k loan down to 350k and you sell one of the 100k houses for say 150k.

They calculate that its one of the homes that was allocated at 20%.  So 20% of the 350 is 70k plus the premium for release (premium goes towards paying down the loan so it isn't a fee) which means when you sold you'd have to pay down the loan 70k plus the 20% premium which would be another 14k.  And then they tack on some minor fees too. So you might have to pay 85k out of the proceeds towards paying down the loan.

But if you had them all in individual loans, you'd pay off the loan for that house and that would be it.  70k

Where its really difficult is if you have a 5 year or 7 year term on the blanket loan. You can try to renew if that lender is still in business or else you have to find someone else to do another blanket loan.

Blanket lender loans tend to have higher fees and poorer terms. Prepayment penalty is up there too. Usually 5-4-3-2-1. 

 No one to refer, but when considering a blanket loan make sure to understand the how the loan would treat removing collateral from the pool. What I mean by that is a blanket loan is underwritten on all value of ALL the properties. Because of that you are often restricted from selling one or two of the properties without posting more cash. This is not often understood but can seriously affect your flexibility in the future.  

If you could find a local land planner, architect or engineer, they (we) review most of the "walk the site" issues from our desk for clients in the acquisition and project planning phase. Local municipalities and states have GIS data online that reveals much of how a property will be developed, even streams can be estimated (nothing like a photo of running water tho). A builder may not know all of the overlapping aspects that affect the build and design - setbacks and buffers for example.

I have a 1 month grace period with pests and plumbing.  After that it's on the tenants.  Are these multifamily doors or single family homes?  Many Associations will complete proactive exterior pest control or you could push for such a service through your boards at a greatly decreased price.  While adding this service may be a plus for the tenant I haven't seen this make or break any good renter or provide the value to offset the expense.