Blanket Loan or keep my SFRs on seperate notes?

5 Replies

Looking into refinancing some of my units.  Should I consider a blanket loan that wraps them all together or keep them separate for accelerated pay off schemes? Thank you in advance for any quality advise.

@Daulton H. I have 10+ blanket loans and enjoy the flexibility that comes with portfolio lending. 

However, one big downside that I've noticed is when trying to sell only one or a couple of the properties associated with the note. It can get pretty tricky because the bank will want the loan to stay at the current LTV. That means that they will only disperse roughly the portion of the proceeds that still keeps the same LTV in line. So you can end up selling something and not having much cash to show for it.

If I had to do it all over again I would package together similar properties that I would likely want to sell all together. Just my .02 cents.

As alluded to above, the operational issue with blanket loans is you give up control of the sale of individual properties to the bank. This could seriously impact your liquidity in a downturn. The bank doesn't have to release any of the sale proceeds until all the blanket loan is paid. Of course, that includes proceeds needed to pay taxes. The bank will do this in a downturn because their collateral value is shrinking. That is exactly when you need the flexibility to manage your portfolio. Watch out for cross collateralized loans for the same reasons

@Daulton H.

Most blanket loans are also “commercial loans”. Meaning it’s hard to find a 30 year fixed “reasonable” rate. At least until you’ve endeared yourself to your local bank. 

You’ll find a lot of 5-10 year then adjusting rates. If you plan to snowball there’s little to no advantage and I would say even a disadvantage. With the individual loans you’re required payment goes down every time you pay one off. Even after you’ve paid 90% of the blanket loan off you’re required to pay the same.