All Forum Posts by: Nathan Frost

@James Bruntfield the blanket loans that most banks offer normally have a higher loan amount than what these properties would qualify for.  I have seen some blanket loans start at $250,000 but many start at $500,000.  The houses themselves might be too small of a loan for most banks.  I would suggest in speaking with banks about the option of refinancing either of these homes separately or together. Good luck!

@James Bruntfield

Hello, call the small local banks in Schuylkill county. Speak with their commercial lending depts. Some will finance 80% LTV and other up to 75% LTV. Make sure you have good comps on similar properties because you'll be paying for appraisals, etc. Make sure you have enough equity to pull. If the market value numbers above are correct then you def will have a nice chunk of change to play with. Remember too with refinancing, it's like a new purchase. Closing costs, title insurance, appraisal, and recording fees etc. Do you have good leases in place on the triplex? Appraisers will take into account the amount of rents and also the local cap rate when determining value. So, are your rents where they should be for the area, the condition of the apt, the sq.ft, and amenities? Make sure with a blanket mortgage that you're able to sell off a property if you desire. That's bery important. Good luck!

Beware, some blanket loans, despite having a partial release clause, will still mandate you pay 120% of the original individual loan amount back to the blanket upon sale. They tend to have higher DSCR ratio requirements than individualizing the properties.

How many times did did your BS Meter go off in this thread? LOL

A blanket mortgage is a commercial loan, a particular lender may state a loan to value but there is no rule as to the LTV as there is with residential loans. A cash out could very well be 50% to 70%, (or they may not do cash outs) depending on the lender so you'll need to ask and shop around.

Each property must be appraised and title insurance obtained on each, so you're not saving much in loan costs except they may close as one transaction, filing fees will be applied to  each property as well. A lender may want all properties insured by the same company with the same renewal date, so you may need to adjust things and see your agent before applying for a blanket mortgage simply to know what the costs will be. 

You won't be getting a 30 year fixed rate on a blanket loan, it will be adjustable and have a limited term, the amortization may be  30 years or could be less, that will be up to the lender in offering you the loan. 

Make sure you get a "Release Fee" on each property; this is an amount that is to be paid to release a property as collateral in the event you need to sell, or if you have an insurance loss that insurance proceeds will be applied to the subject property and not to the whole loan keeping you stuck with an encumbered damaged property, remember they don't make construction loans as a second and the blanket loan won't subordinate (usually) to another lender, it could get messy, so have a release fee stated and understand how payments will be applied.

A line of credit is not a blanket mortgage but a line of credit can use other collateral, different animal and it may or may not fit you needs. Again, costs will be incurred with each property taken as collateral and you will have the release fee requirement as well with a LOC. I wouldn't advise a LOC with additional collateral.

Interest will be market rate, might be higher due to more loan administration with some lenders. They will be fixed for a short term then adjusted or renewed or they will be adjustable, there may or may not be a cap  rate, so check on the index and the spread as well. Loan terms will vary from lender to lender.

Blanket loans can be dangerous as all your eggs are in one basket with that lender, they don't foreclose on just one property but on all of them. They have no obligation to renew any loan, so you might be scrambling to find other loans. A lender may also want stronger debt coverage ratios and be tougher on appraisals because they will have more work involved securing several  properties if things go south for any reason.

Your loan amount is rather small for a blanket loan, you should have better luck with a small lender/bank or regional bank as many larger lenders may want a minimum loan of $500K or 1M.  Again, loan administration costs are more so they may have limits. 

I'd bet you'd be better off getting separate loans from the same lender when it's all said and done. Good luck :) 

When you're in a blanket and sell you have to pay down 120% of the loan balance of each property when the blanket is broken . Individually is always the best way to go 

@Flavio Espinal

So i just closed on this loan last week actually. I have rentals in Texas and had a very difficult time trying to find a heloc for investment properties. CMG now offers that in Texas and i jumped all over it. I am yet to see any downside so far again with me just closing but if you have any specific questions i don't mind sharing

2-parts: 

First, take a big step back from things with properties, clear head, go golfing, fishing, whatever just "clear the deck" of everything.     Then, when clear, come at it fresh BUT with a focus that your going to do all things, answer all questions, all "feelings" with MATH. That your going to see what MATH has to say on it all. 

So, your going to have to get accurate with what the math says, of what the properties themselves are now.     As i said before, I have heard nothing of where your Cap-Ex stands. So, do an accurate analysis of where Cap-Ex stands.     

Next, get math of where property and market rent appreciation projects out as for next 1,3,5yr window. NO, this is not a "feeling" based thing, it's DATA driven. If unsure how, lookup local chapters of MFH landlord associations, they are champions of this and may find data from them. Yes, they do different assets but the market data will have a lot of cross over. City Data is another resource. You need to sort out Supply-Demand curve. 

Now if done right, your going to have all this data compiled, your going to have an idea of market direction, of what the future will hold. And, most importantly, what the #'s REALLY look like on those properties. Way WAY too often people get into "cheap" properties only to find they are very VERY maintenance expensive, ticking maintenance bombs. 

LAST PART, don't just knee-jerk "ok, SELL", no, IF the math says "sell" REPEAT this fact/data finding mission to answer the question of how to BEST sell, for MAXIMUM ROI. All this talk of relying on PM's and others to peg an as-is now-Now-NOW sale..... that's just bonkers.

What is the MATH of how to BEST sell? Is it retail at vacancy? Is it via a terms offering retail? Is it maybe offering a terms purchase to existing tenants here-n-now???? There is so many variables and potentials in selling, net-0 is NOT an "Investors" action or journey. 

2nd-Part; Explore the other ways to REI because I got a funny feeling there is a different segment of the industry that would serve a better fit for yourself.

Honestly, these issues you've aired, a cold-blooded "Landlord" wouldn't loose a wink of sleep over. These are for most part what one would call "good problems". Don't believe me, oh-man, just wait until you have REAL Landlord problems, like evicting a tenant because there meth-fueled adult-child moved in and is rapidly destroying the place, only to get it all done over months and receive back a human-feces painted home, copper stripped, destroyed everything...... Or, or, or.... It get's a LOT uglier then what's keeping you up at night, oh-so-much uglier. 

If what you've detailed has been keeping you up with worry, I can't imagine the wreck you'd be dealing with a tenant nightmare. 

SO as said, I get feeling your NOT cut-out for this specific iteration of REI. Which is a-ok, there is a lot of other ways to do REI, it's not a 1-strategy-fit's-all thing. And forcing it, that's a setup for real hardships to come. Because eventually you WILL have a tenant nightmare, it is the law of averages, do landlording long enough and it WILL happen, not if but when.