500K minimum blanket loan is killing me.

15 Replies

I am an investor in the Cleveland market (suburbrs). I own 7 rental properties all with 50-65K purchase price. I am coming up on my 10 mortgage max so I have been contacting lenders that can blanket these mortgages.

The problem is that they all have 500K minimum loans -  Right now I am around 300K. Are there lenders for these types of loans that will go below 500K?

For what purpose?  The "10 loan max" for conventional mortgages is actually a "10 properties mortgaged max" regardless of one blanket loan, or 20 loans on 10 properties.

If he does a blanket loan, he would simply put them under a corporation name and that would free those up.

Here's the other thing though? Why do you need to put these in a blanket loan exactly? 

Just start getting your loans from local banks. They will allow you to have over 10 properties.  It will be commercial terms but so what. So will your blanket loan.

So you can either:

1) Blanket your 10 properties. Then buy 10 and get conventional loans and then blanket those again. Rinse and repeat. But you're refinancing these things twice.  And that also means that after your blanket, you have 10 homes on commercial terms and NONE on conventional terms.

2) Leave your current 10 properties in their conventional loans forever. And just keep moving forward with commercial loans on each individual home you buy.

You'll have commercial terms on these homes. But so what? You'll have 10 homes always on conventional loans. And thats all you can have at any one time. You won't have to refi all your homes twice. 

And getting blanket loans is very difficult and typically they require a lot more nonsense (i.e. escrows for taxes, insurance and capex).  Doing the commercial loans with local banks is much easier. Most of them are now doing them again. And they don't require you to escrow anything.

Terms with individual banks for single homes are also far better than what you'll get for a blanket loan too.  

My 2nd most recent loan was for 4.25% for a single family home 5 yr amort over 20. 75% LTV. My last loan was for 5% but amortized over 30 (5 yr balloon). SFH. 75% LTV.

I was recently quoted 6% on a blanket loan . Amort over 30. Blanket of 10. 70% LTV. But they wanted to escrow everything (taxes, insurance, and cap ex). So now they'd be holding a big chunk of my money that I would otherwise get to show to banks as more reserves.

So my recommendation is keep moving forward with single loans with local banks. Leave your conventional ones in place.  I'm at 32 homes - 24 of which are commercial terms.....

Get your 10 conforming mortgages first, then do as others have stated, buy your properties with commercial loans.

If you put 10 properties into commercial loans, and have a personal guarantee on that loan,,guess what, you don't qualify for conforming mortgages because, as stated before, you have 10 mortgaged properties already.....even if they are in an LLC, if you own the LLC and have a personal guarantee on it, they can count those properties toward your 10 Properties..so be careful

Originally posted by @Mike H. :

If he does a blanket loan, he would simply put them under a corporation name and that would free those up.

Here's the other thing though? Why do you need to put these in a blanket loan exactly? 

Just start getting your loans from local banks. They will allow you to have over 10 properties.  It will be commercial terms but so what. So will your blanket loan.

So you can either:

1) Blanket your 10 properties. Then buy 10 and get conventional loans and then blanket those again. Rinse and repeat. But you're refinancing these things twice.  And that also means that after your blanket, you have 10 homes on commercial terms and NONE on conventional terms.

2) Leave your current 10 properties in their conventional loans forever. And just keep moving forward with commercial loans on each individual home you buy.

You'll have commercial terms on these homes. But so what? You'll have 10 homes always on conventional loans. And thats all you can have at any one time. You won't have to refi all your homes twice. 

And getting blanket loans is very difficult and typically they require a lot more nonsense (i.e. escrows for taxes, insurance and capex).  Doing the commercial loans with local banks is much easier. Most of them are now doing them again. And they don't require you to escrow anything.

Terms with individual banks for single homes are also far better than what you'll get for a blanket loan too.  

My 2nd most recent loan was for 4.25% for a single family home 5 yr amort over 20. 75% LTV. My last loan was for 5% but amortized over 30 (5 yr balloon). SFH. 75% LTV.

I was recently quoted 6% on a blanket loan . Amort over 30. Blanket of 10. 70% LTV. But they wanted to escrow everything (taxes, insurance, and cap ex). So now they'd be holding a big chunk of my money that I would otherwise get to show to banks as more reserves.

So my recommendation is keep moving forward with single loans with local banks. Leave your conventional ones in place.  I'm at 32 homes - 24 of which are commercial terms.....

 Thats great to hear. I was not aware that banks would do a commercial loan on 1 residential property. I will start making some calls.

Oh yea. Gotta call your local banks. And you need to get to the commercial division. If they send you to the residential side, you'll hit a wall because they follow the fannie mae guidelines.

And the bigger banks (bofa, citi, etc) don't do these types of loans. You need to talk to the banks that have one branch or a handful of branches, etc.  They should have a commercial division. If they do, you want to go there and explain your situation.

Tell them you're over the 10 conventional limit and want to do a commercial loan on your next investment property and that you understand it will be under commercial terms - i.e. 5 yr balloon, amortized over 20 or 25, etc. and you're ok with that.

They can even do a commercial loan under your personal name so don't think you need to setup a corporation or anything.

I did a conventional loan recently even though I had 27 properties with mortgages. Its because only 7 were mortgages under my name. The other 20 had mortgages under my corporation name (which might be one reason you would create a corporation entity).

But either way, you should be able to find several banks that will do these types loans. Just need to ask for the right dept and make some calls. I'd say about 1 in 3 are doing these today. When I first began, it was about 1 out of every 20.

And what you'll find is that as you develop relationships with these banks and demonstrate a history of payments and growth, they'll make it that much easier for you to do loans.

I've got several banks that no longer require me to submit full packets when I do loans with them. Bank statements, pay stubs and the house. Thats it. They don't even require me to pay for the appraisal up front. They just order it and add it into the closing costs.

But try to build a relationship with several banks. Because every so often a bank will say these loans are on hold temporarily while their ratios balance out. Basically, they are only allowed to have a certain ratio of their lending go to certain loan types and when they exceed that for sfh loans, they put a kibosh on them until their other lending catches up.

Definitely agree on calling local banks.  I do not think it is necessary to go the commercial route unless you exhausted all other possibilities.  I have a local credit union giving me 15 year term, 5% fixed interest, no seasoning requirements, 70% loan to value. 

Originally posted by @Mike H. :

Oh yea. Gotta call your local banks. And you need to get to the commercial division. If they send you to the residential side, you'll hit a wall because they follow the fannie mae guidelines.

And the bigger banks (bofa, citi, etc) don't do these types of loans. You need to talk to the banks that have one branch or a handful of branches, etc.  They should have a commercial division. If they do, you want to go there and explain your situation.

Tell them you're over the 10 conventional limit and want to do a commercial loan on your next investment property and that you understand it will be under commercial terms - i.e. 5 yr balloon, amortized over 20 or 25, etc. and you're ok with that.

They can even do a commercial loan under your personal name so don't think you need to setup a corporation or anything.

I did a conventional loan recently even though I had 27 properties with mortgages. Its because only 7 were mortgages under my name. The other 20 had mortgages under my corporation name (which might be one reason you would create a corporation entity).

But either way, you should be able to find several banks that will do these types loans. Just need to ask for the right dept and make some calls. I'd say about 1 in 3 are doing these today. When I first began, it was about 1 out of every 20.

And what you'll find is that as you develop relationships with these banks and demonstrate a history of payments and growth, they'll make it that much easier for you to do loans.

I've got several banks that no longer require me to submit full packets when I do loans with them. Bank statements, pay stubs and the house. Thats it. They don't even require me to pay for the appraisal up front. They just order it and add it into the closing costs.

But try to build a relationship with several banks. Because every so often a bank will say these loans are on hold temporarily while their ratios balance out. Basically, they are only allowed to have a certain ratio of their lending go to certain loan types and when they exceed that for sfh loans, they put a kibosh on them until their other lending catches up.

Thank you for the tips. I had no idea they offered these loans. Wish someone recommended this route when I asked the question a month ago before I contacted a dozen national lenders. Great news!

Changed your title from "warp" to "blanket".  Wrap means something completely different when discussing loans.

Refinancing these properties into a single blanket loan isn't going to help with getting more conventional loans because you still have 10 mortgaged properties.  You might get away with this:

I did a conventional loan recently even though I had 27 properties with mortgages. Its because only 7 were mortgages under my name. The other 20 had mortgages under my corporation name (which might be one reason you would create a corporation entity).

But if your entity is something like a single member LLC then these 27 mortgaged properties are truly your responsibility. You probably gave personal guarantees when you got them. Failing to disclose them to the lender would be fraudulent. If the entity truly is independent and there is no personal guarantee on these loans, then this should be find. Not an attorney.

There are banks that will do portfolio loans on SFRs.  They may take a little work to find but they're out there.

Originally posted by @Jon Holdman :

Changed your title from "warp" to "blanket".  Wrap means something completely different when discussing loans.

Refinancing these properties into a single blanket loan isn't going to help with getting more conventional loans because you still have 10 mortgaged properties.  You might get away with this:

I did a conventional loan recently even though I had 27 properties with mortgages. Its because only 7 were mortgages under my name. The other 20 had mortgages under my corporation name (which might be one reason you would create a corporation entity).

But if your entity is something like a single member LLC then these 27 mortgaged properties are truly your responsibility. You probably gave personal guarantees when you got them. Failing to disclose them to the lender would be fraudulent. If the entity truly is independent and there is no personal guarantee on these loans, then this should be find. Not an attorney.

There are banks that will do portfolio loans on SFRs.  They may take a little work to find but they're out there.

Okay blanket loan - got it. What would my opening line be when I call these lenders. I feel like I don't always do a good job explaining my situation and what I am looking.

I would first ask if the do investment real estate loans.  If they say yes, then get into the specifics.  I think you'll find getting commercial type (portfolio) loans will be easier than finding someone who will do blanket loans.

You want to be dealing with smaller banks or credit unions. There are more of these around than you might think. You just don't notice them. So do a google search on "bank" and your city, then look for ones with just a handful of branches. Credit unions are another good source. You can also try the FDIC institution directory: https://www2.fdic.gov/IDASP/

This is a searchable database of banks.  Its not the easiest tool to use, but it does work if you spend a little time figuring it out.  You can search for smaller bank, then look at their assets.  For banks, loans are assets.  This site breaks them out by type and one of the types is real estate loans.  So look for banks that show real estate loans in their assets and you've found a bank that makes portfolio loans.  Or, at least has in the past.

Originally posted by @Jon Holdman :

I would first ask if the do investment real estate loans.  If they say yes, then get into the specifics.  I think you'll find getting commercial type (portfolio) loans will be easier than finding someone who will do blanket loans.

You want to be dealing with smaller banks or credit unions. There are more of these around than you might think. You just don't notice them. So do a google search on "bank" and your city, then look for ones with just a handful of branches. Credit unions are another good source. You can also try the FDIC institution directory: https://www2.fdic.gov/IDASP/

This is a searchable database of banks.  Its not the easiest tool to use, but it does work if you spend a little time figuring it out.  You can search for smaller bank, then look at their assets.  For banks, loans are assets.  This site breaks them out by type and one of the types is real estate loans.  So look for banks that show real estate loans in their assets and you've found a bank that makes portfolio loans.  Or, at least has in the past.

 Thanks Jon - You have been very helpful

Don't set your goals lower, set them higher. They won't lend unless you have $500K? Go get yourself $500K in debt! Sounds like a challenge to me. I love a good challenge.

Maybe become a better buyer and try to get a few (sounds like you'll need about 4 to cover $200K) more houses with hard money (private would be better!). Then you can refinance those and meet the $500K minimum.

A general thanks to all who answered above!  Always such great knowledge!

@Adam Craig   would it make sense to get a commercial line of credit against assets?  I am not familiar with rates currently but this could "act" as a semi permanent mortgage option.

@Adam Craig  just be aware that with a commercial loan you could be looking at a ten or seven year note with a fifteen or twenty year amortization. Depending on your strategy this may not be preferable. 

At this point, you should probably invest a good amount of time beating the bushes on the lending side, who knows what is available. There are quite a number of financial institutions in the city or just south of it that you have never even heard of. 

Once the ten limit is removed, you stand on the strength of your income statement and balance sheet. Position yourself for success.

I have lenders that do blanket loans,...

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