Own to Rent / Buy and Hold Real Estate Investor Financing

Real Estate Investor Financing

Wannabe Investors, now is a great time to invest in residential properties. Whether your strategy is single family, two to four unit buildings, condominiums and town homes as well as multifamily apartment buildings the combination of great prices and accessible financing makes this an optimal period for investing.  If you are a Real Estate Investor operating in the business buying residential properties to hold for profit from the positive cash flow and equity appreciation, there were only a few financing options available. For conventional residential one to four unit properties the standard conventional guidelines limits a borrower to only have four properties financed, including their owner occupied personal residence.

Now there is a great solution for you. Even while conventional financing guidelines severely limit who can qualify (and this has only gotten worse in the past few years) there has been a rise in private lenders that will lend on residential investment properties with similar guidelines as commercial apartment financing. This is great news for the those in the business of owning and managing their own portfolio of rental property. Here are a two examples that were not often available even a few months ago.

Blanket Financing

Like all options discussed in this article this financing is for business entities, such as limited liability corporations or “C” Corporations, and not for individual sole proprietors. This is to make sure the lenders are not violating any residential lending laws meant to protect consumers as the purchase and finance their owner occupied homes. Inherently these collateral must always be non-owner occupied and used for investment and business purposes. Understanding this, it is natural that any blanket mortgage must cover at least five units. Anything less would not be considered commercial lending.

What is a Blanket Loan?

A blanket loan is where two or more buildings are encumbered and used as collateral for one loan. In other words one mortgage can cover two properties or one hundred properties versus two to one hundred loans. Could you imagine being a small business owner with fifteen or more projects that you own and are holding that each have separate loans. Generally, they are like buildings in a relatively close proximity, but that is not always mandatory. For the Entrepreneur who seek to buy and hold multiple properties for long terms the blanket loan could be a great option.  Additionally, it may actually cost less even though there are not many programs available for these small business owners.

No Seasoning Cash Out Refinance

The term “seasoning” in the mortgage world means how long an owner has owned the specific property. It can sometimes mean how old a loan is, but for our discussion seasoning is limited to ownership of property. The underwriting rules for a conventional lender requires a property to be “seasoned” or owned for at least one year for the value to be based on the current appraisal versus the acquisition costs. For example if the purchase price was $50,000, the rehab cost is $10,000 and the current appraised value is $100,000 the maximum loan would be 75% of the purchase price or $45,000. The value is $60,000 based on the the seasoning rule. With no seasoning requirement the the loan amount would be 75% of $100,000 or $75,000. This real estate investor strategy allows the investor to buy and hold plus earn an immediate profit of $15,000 if they refinanced (minus closing costs). This allows the investor to have similar immediate return as a flipper yet they still own the property with all the benefits of the cash flow and equity growth. This works on small transactions as low as this seventy five thousand dollar deal to as high as multi-million dollar commercial apartment buildings. Quite often with commercial lenders the seasoning time may be two years cor cash out refinance transactions.

No Seasoning Cash Out Blanket Loan

Finally and most importantly, there is the ability to use both of these strategies simultaneously. This offers the businessmen to access cash in their real estate portfolio they they would not have access to with any conventional funding programs.

These are just two financial options that can help the small business real estate investor succeed when they choose to own to rent or buy and hold their properties for long term cash flow and equity building.



Blanket Mortgage for Residential Real Estate Investors

Residential Real Estate Investors

Now is still a great time for investors to purchase residential one to four unit property. Property values are relatively low, interest rates are low and conventional financing is available to a point. The problem occurs when you have more than 4 properties financed. Today the answer is blanket mortgage financing. This allows the serious investor an opportunity to have own 10, 15, 20 or more units. When an individual investor decides to have a real estate business a blanket mortgage can help them continue to grow.

Blanket Mortgage

This is a commercial loan for businesses that will encumber multiple properties under one loan. For residential investors this allows them to have stable long term financing. This can get them off the hard money roller coaster, especially if they are looking to hold instead of flip properties. Blanket loan financing will not limit how many units they can have financed as does conventional residential financing.

Here are the basic guidelines:

  • Minimum loan amount is $500,000
  • Minimum number of  residential units is 5
  • Minimum individual property value is $50,000
  • Minimum occupancy is 90%
  • Properties must be owned by a company – not individual
  • Property types include: single family, 2 to 4 unit, condominiums, town homes, multifamily properties and mixed use properties that are at least 60% residential.
  • Up to 75% loan to value
  • Minimum Debt coverage of 120%
  • Perfect Credit not mandatory


If you are a residential real estate investor with more than 5 units that can use stable long term financing you should consider a blanket loan for purchasing property, refinancing your existing portfolio or getting cash out to help you invest in other properties.




New Blanket Commercial and Residential Investor Mortgage

New Mortgage

Actually this is not a new program, but over the last 3 years many similar programs have been discontinued. Today private investors, hedge funds and bridge lenders have begun to offer programs similar to those that were available before the recent financial crisis. One such program available today is the Blanket Mortgage for Commercial or Residential Investor properties. The unique features to this financing option is that it is based on the value and cash flow of the property, not on the credit of the investor.

Commercial Mortgage Loan Size

Most lenders have minimum financing criteria. Generally speaking higher minimum loans are attached to the best rates and terms. This is sad because it locks out a lot of small investors and people buying investments in markets where the average loan size are smaller. It is not uncommon for  the note to be at least two million dollars. But there is a market that specializes in small cap financing (smaller loan amounts). These small cap programs have much higher rates to go with the lower loan sizes. These new (retread) blanket commercial programs offer lower rates and more flexible terms. Though still higher than conventional rates, they are much lower than small cap and hard money programs. For the Blanket Mortgage, the minimum funded amount is two hundred and fifty thousand dollars ($250,000) with no maximum loan size.

Residential Investor Loans

Residential Investor financing is the hardest hit in the banking meltdown. It is exciting news that private lenders are back in the market to fund investor properties based primarily on the value and cash flow of the subject property. For residential property owners with multiple properties they will not be hampered by the conventional guidelines that only allow for four residential loans, and the credit criteria is lowered while the emphasis is on the income and value of the collateral.

Blanket Mortgage

Whether single family, two to four units, multi-family, mixed use, single use, or industrial properties the blanket program will allow you to put like properties in the same area into one loan. This has many benefits to the owner. The benefits include:

  • Larger Financing Sizes: By increase the loan size by adding multiple properties the owner can qualify where they could not and may even get lower rates.
  • Mortgage Qualifying: Smaller balances often do not qualify for financing.
  • Lower Credit Score Requirements: Conventional and bank programs require higher credit scores and tougher credit criteria.
  • Fewer Total Loans: a blanket mortgage will cover two or more properties allowing for lower total cost and fewer note payments to monitor.
  • Make Conventional Programs Available: Once the financing is consolidated under one loan this may open opportunities for conventional residential financing.
  • Reduced Total Fees: Fewer loans equal fewer fees.
  • Reduced Rates: The rates are much lower than hard money and bridge loans.
  • Flexible Terms: The program offers short and long term options as well as fixed and adjustable plans with flexible amortizations.
If you are a Real Estate Investor with multiple properties a blanket mortgage may be the program for you to help you qualify for commercial or residential financing while reducing fees and costs as you grow and sustain your business.
UPDATE 7/2012