Should I keep my MFR loans separate or combine them??

Question

I currently own a four-plex and a duplex.  I purchased the duplex earlier this year via a cash out re-fi from the four-plex and walked away with 19k at the closing.  I'm currently looking at another duplex and I am curious what the community has to say with regards to repeating the same process to purchase my 3rd property. I may not have enough equity left to cover all the down payment which is fine but I am trying to decide if I should use a different lender and keep the new duplex as a separate loan or just roll it into my existing loan.  Is there benefit to having all my properties under one loan or is it best to keep them separate?? TIA!!

Steve Morris · Answer

Big reason NOT to get ONE BIG HONKIN' LOAN ON EVERYTHING

RECOURSE

One property goes sideways, whole portfolio may be at risk if you default.  Same reason you should have a LLC for each one.

Also, blanket loans look at the personal side more (you not the property) since they don't really like having a bunch of diff properties under one loan.

Salvatore Lentini · Answer

@Joshua Reffett - I'm not a huge fan of blanket loans.  The benefit is one mortgage, tax bill and insurance payment but Also, decreased closing costs if you're buying multiple properties at the same time but only the fees from the lender.  Title costs, certs and transfer taxes all remain the same.  And fees from the lender when you're buying multiple properties can be negotiated anyway so it's not a huge benefit.  I feel like that's where the benefit ends.  In terms of downside, you have decreased flexibility in the future.  If you decide you want to sell one of the properties it's going to cost you.  Most lenders will have hold backs and sometimes your loan will not recast or adjust in anyway.  Meaning, you will have one less property being financed but the same mortgage payment (which makes it difficult to cashflow moving forward).

Whitney Hutten · Answer

@Joshua Reffett I assume that they are all under the same LLC then... How much equity can you afford to lose if one property has issues?