Blanket Loans or Portfolio Banks

17 Replies

Need advice on my current situation. 1st has anyone had any dealing with a local NYC portfolio bank Maspeth Federal? Has anyone had a dealings or success with 1st Key Lending?

I currently own 10 SFR. 4 of them have mortgages, the rest do not. As we all know, I am now stuck with moving forward with conventional financing on my next purchase/s.

The value of my holdings is well over $3M+, the outstanding debt is under $1M, so I have tons of equity and positive cash flow.

I would love to continue this course of acquiring homes and building my holdings to a significant number.

I am very happy with the investments I have, and realize that If I can triple this, it would provide fantastic income! 

Given the equity I have in my holdings, what would be the best strategy to grow this into something much bigger? 

Thanks,

Leo

Leo,

I haven't dealt with either of those institutions, but you definitely should seek out a portfolio lender, if the properties are in an LLC, or any bank if they'll go up to 10 properties under your name.

What you can expect is 70% to 70% loan to value (LTV). Blanket loans are fine and save you maybe 10% to 20% on closing costs (which can seem hefty), but if you ever want to sell one of the properties it is a bit more complicated to pull it out of the blanket loan. Individual mortgages are more nimble.

Even with 70% mortgages you'll have plenty of equity and that should give you enough funds to more than double your portfolio.  Since growing is your goal I'd definitely do it.

Larry

The properties with mortgages are in my personal name, the ones without I have put each individually in LLC's.

The blanket loan approach is totally new to me, and yes that is my concern.  If I want to sell one prop it would be difficult. I currently make additional payment to 2 of the props I have and will have those 2 paid off in 10 yrs. if they are in the blanket how would that work? I only have the 1 payment. I guess I could just apply extra principle to the 1 blanket loan?

It seems to me the only advantage for a blanket in my current situation would be that it would free me up to purchase 4 more props conventionally.

I am testing out Maspeth Federal now to see what there criteria is. This is probably the easiest way.

1st Key Lending (like B2K) if very SLOW in getting back to you. I have submitted their extensive questionnaire outlining all my properties and have yet head from them (1month ago) I would think given the value of my holdings they would be rather inclined to lend?

They did mention that they would be valuing my holdings on rental income they produce and not soley on the value of the property? If they conservatively and under valued my props at say $2.5M don't you think I would be able to get out a min of $1.75M? (20%of value)? If they only give me enough money to pay off the 4 current mortgages, then its probably really not worth it for me?

I thought the best way for me to make bigger leaps quickly would be to consolidate my props into 1 blanket loan. Given the amount of equity in them $2M+, I could pay of the 4 existing mortgages and have a min. of $600-700k left to invest with?

@Leo Falbo  I'm not up in New York, but your post is timely. I'm in a similar situation myself and have been shopping portfolio lenders. Just met with a small bank here in Fort Lauderdale yesterday and they offered me a couple of solutions. 

The first was the blanket/portfolio loan. Up to 75% LTV, 5-7 year balloon, 4.5-5% interest, 20 year amortization seems about average here these days. The loan would be made against multiple rental properties, which means that as Larry was saying, it is a little more complicated to sell down the road. But it's really quite simple: the bank will write you an official release with pay-off amount for a specific property when you want to sell. So you can still sell a house separately even if it is in the portfolio of properties that the loan is for.

The second option is to give us a line of credit (LOC) based on our current equity and cash flows. Once the approval is given, we can use that line of credit to purchase more rental properties. Any credit we use is interest only for one year, and must be paid off within one year. What the bank will do is refinance any property I purchase with the LOC and turn it into a regular mortgage loan before the year is up. This is great if we find a property that needs some work and requires a "cash" offer and quick close. We can purchase with the LOC, fund the rehab ourselves, and then refi at the new appraised value as soon as the work is complete. This bank will refinance based on a new appraisal at anytime after purchase as long as we can demonstrate that we have made repairs that warrant a higher value.

Hope that helps, keep us posted on anything you discover since I am new to portfolio loans also and looking for all the info I can find! 

Thanks Chris.. Your are from my home away from home Miami!

Interesting information you provided. I really shouldn't be to concerned I guess, with putting my props into a blanket loans since I am not looking to sell any of them ever...I have little by little built my own personal rental portfolio over the past 15year with the buy and hold long term strategy. The terms you outline in the 1st paragraph sound reasonable, if I truly can get 70-75% LTV on my props. If so, then I would be interested in such. The 2nd paragraph is even more interesting and something I am unaware of.. I like this scenario, given I should be able to get a substantial LOC given the equity I have, but more importantly your small portfolio bank will refi this prop on 30 year fixed, and appraise it based on it new improved value. Maybe my small portfolio bank Maspeth Federal would do the same?

@Leo Falbo I'm sorry, perhaps I was not clear on the previous post. When the bank refi's the LOC it would not be a traditional 30 year. It would be similar to the blanket loan terms, most likely a 7 year balloon. But this isn't really a problem as long as we don't over-leverage. My main concern is not how much cash I can get back out of the property, but that the property is cash flow positive after all expenses and mortgage payments. After 7 years pay-down on a 20 year amortization schedule there should be enough equity in the property to refi once again. Since the bank is in business to make money on their money, they want us to continue to refinance the properties as long as we keep paying on time.

Yes, a 30 year traditional mortgage is better, but as you know tough to do once you hit 4 houses. One major upside with this plan is that we can build a great relationship with the bank so that they will work with us over the long term to buy more/larger properties. I think this is more important to the growth of our business long term. 

Yes, more clear now. I agree with you, as my most important element is that I am cash positive and have substantial equity in each of my SFR. So, with the LOC, I would be in a similar situation as yourself with positive cash flow and equity so therefore refi again is not much of a problem..

I am at the 4 house limit so im stuck in that rut. I can though, purchase 6 more (total of 10) with say 25-30% down on with a 30 year fixed conventionally from what I understand. This is not the worst case, but for me being in the RE business for over 20yrs and having access to undervalued props, the ability to purchase a SFR, renovate it and have it appraise for well over $75k-100k then what I paid for it is tremendous! This allows or shall I say has allowed me the past 4 times to purchase all cash, renovate, lease it and then get almost all of my cash back and be cash positive every month.

@Leo Falbo  any update on Maspeth Federal? What have they responded to your situation?

(585) 678-6857

Eddie believe it or not I haven't heard any updates as of yet!! My 3 deals I have submitted with them through my own outside private banker who is acting on my behalf is still in consideration... I guess? I gave them 3 checks for appraisals and that was on July 10th. The only thing I have heard was the our POA (power of atty) was improperly filled out, so I had a new one sent in 1 day later... VERY Frustrating! I understand they are slow in their process but they get deals done, so I will have to wait..

I really would like to know where I stand with them, as I fantastic 3 family in my area just fell on my lap, that I am negotiating privately with the sellers..

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Will do.. They are EXTREMELY SLOW!

Still nothing, I have given them checks for appraisals over 1 month ago and they haven't even scheduled a date for that yet.

I am sure I will have some updates with in a week

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@Chris Kennedy I am so happy I stumbled onto this forum. I am looking for a portfolio lender in the Broward County area. Can you please tell me the name of the bank you are dealing with? I have been looking for a portfolio lender who will give me an LOC and then refi. Hopefully (after the rehab) I can pull my all of my money out of the deal.

Thanks in advance for your help.

Finally received a commitment from Maspeth! Hopefully closing next week.

@Chris Kennedy@Lisa Mauritis

I am looking for a portfolio lender in the Broward county area too. Could you please share the name of the lender you were talking about?

Thank you in advance. 

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