Although owning and investing in multiple properties is a smart move, it can also feel like an administrative headache. One of the biggest sources of frustration you may encounter is juggling your financial commitments. Obtaining several sources of financing and repaying them all individually can make accounting difficult. As you may already know, failing to streamline your accounts is a fast track to reducing your profits.
As an alternative to achieving several funding sources, you may want to consider a blanket loan. Knowing more about what they are, how you’ll benefit from using one, and ways to obtain a blanket loan even with credit or property issues could make your development efforts a lot easier.
What Is a Hard Money Blanket Loan?
In its simplest terms, a blanket loan is a single source of finance that allows you to cover several investments. Rather than paying several financial institutions or juggling multiple agreements, you can use a blanket loan to funnel all of your finances into one source. Depending on the nature of the loan you could dip into it at a later date to fund an additional property, or you can take one out to refinance existing agreements.
When you bring hard money and private money into the equation, you make blanket loans easier to access. With conventional banks, blanket loans go to those who have an excellent or great credit rating. If yours is simply good or satisfactory, you may see your borrowing opportunities narrow. Additionally, those who are willing to lend to you could prolong the process with their administration requirements, which is less than ideal in today’s real estate market.
In contrast, a hard money loan usually comes from a private investor who has more lenient lending requirements. Providing you have assets in the form of property that you can secure the loan with, they’ll lend between 65 and 75 percent of its worth. In the financial world, lenders refer to this as the Loan-to-Asset Value (LTV). To obtain credit against your existing assets, you’ll need to get a surveyor’s report from an independent party. These reports provide assurance to your prospective lender and increase your chances of acceptance.
What Are the Advantages of Choosing a Private Money Blanket Loan?
Unlike traditional blanket loans, private money investors can deliver your funding in as little as 10 days. If there’s an urgent need to consolidate your finances or if you want to invest in several projects at once you can do so in a time-sensitive manner. Another advantage is the loan’s quick turnaround time. Private money blanket loan lenders usually require interest rates ranging between 6.50 and 9.50 percent. In exchange for the slightly higher costs, you’ll benefit from:
- 1-3 year guaranteed interest periods on long-term loans
- the opportunity to repay the loan within 30 days on bridge loans
- enough flexibility to keep the loan for many years if needed
Thanks to the fluctuating nature of each property development project, the terms of these loans are largely flexible.
What’s the Best Way to Secure a Hard Money Blanket Loan?
Hard money loans come in a variety of formats. You may find that your prospective lenders include:
- Mortgage providers
- Online lending firms
- Private investors
- Credit unions
As you can probably see, reaching out to each of those options can become an administrative headache in itself when you don’t have the right assistance. One way to overcome this is by using a hard money loan broker.
Brokers have strong networks of individuals and institutions that are willing to provide hard money blanket mortgages, which means that you have access to a pool of opportunity. In addition, they possess the financial expertise needed to determine which options are the most realistic and best for your loan scenario. By analyzing your current situation and reaching out to their investors, they’ll place you with the right funding source and expedite your application.
Another benefit of using a broker is that they can discuss which finance terms best meet your requirements. For example, if you don’t need to access all of the finances at once but you know developing another property is on the horizon, it’s handy to have a collection of cash to draw from.
Whether you’re fixing and flipping or investing in a rental property, hard money blanket loans can make your life easier. If the idea of using one appeals to you, First Capital Trust Deeds can walk you through the process and answer any questions you may have.