With all the awesome benefits that come with having a blanket loan, there are also some hurdles to being able to secure and maintain one. From ongoing reporting and property management requirements to red tape on occupancy and seasoning, lenders have made it virtually impossible for small investors to get a blanket mortgage.
With our specialization and focus on creating loan programs custom tailored to serve buy-and-hold investors, Visio understands the needs of long-term single family residential investors and the loan features that enable them to grow their portfolios quickly. Our Rental360 Portfolio+ is designed to help long-term investors big and small expand their businesses with as much simplicity and speed as possible.
Most lenders require that an investor own their property for 3-12 months (ownership seasoning) before they will refinance it. This means that money is locked up in the property and not accessible to be used by the investor for other investments.
Visio only requires 30-day ownership seasoning, which allows investors to get cash out of their property quickly so they can build their portfolios faster.
Some blanket loans may be marketed as “long-term” loans, such as 15-year or 30-year mortgages. However, they’re typically only partially amortized, meaning they have a balloon payment. This means the borrower is required to pay off the remaining balance of the loan after a much shorter period, usually five or ten years. Unless the investor sells their long-term, cash-flowing, retirement income generating rental property, they’ll have to find other means to pay off their mortgage in full.
But with Visio’s 30-year fully amortizing blanket loan, the Rental360 Portfolio+, you’ll never have to worry about a balloon payment!
Financial and Personal Information
Every lender goes through a qualification process with their prospective borrowers. This is done to minimize the risk of losing money (can you blame us?). Most lenders will require tax returns from and perform cash flow analyses of both the borrower’s personal and business finances. These income qualification requirements can be a major issue for those who, like many investors, are self-employed and/or have inconsistent income. On top of that, they’ll sometimes require a professional resume (usually necessitating at least two years of property management experience) and a project proposal or business plan. For an investor who is just starting out, these are very difficult demands to meet.
Qualifications for Visio’s Portfolio+ are based mostly on the assets rather than the borrower. To determine your eligibility and rate, we don’t even look at or ask for your tax documents. Nor do we calculate your debt-to-income ratio (DTI). Instead, we look at your credit score, the portfolio’s debt service coverage ratio (DSCR) and loan to value (LTV), and property condition. DSCR determines a borrower's ability to pay back a loan based on the monthly rent of their property and is calculated as Gross Monthly Rent / Monthly PITIA (principal+interest+taxes+insurance+association dues). LTV is the ratio of the loan amount to the current appraised value of the property in it’s present as-is condition.
Reserves and Sourcing/Seasoning of Funds
Another important metric that lenders consider is how much money the borrower has saved (reserves). Lenders require you to have a certain amount of money in the bank as a cushion for emergencies (because they WILL happen). Most require six months of reserves, meaning six times the monthly PITIA (principal+interest+taxes+insurance+association dues). On top of this, they also want to know where the money came from (sourcing) and require it to have been in your account for three or more months (seasoning).
Number of Properties
Most lenders will only do a blanket mortgage on a minimum of 5-7 properties. This can be a disqualifier for smaller investors with fewer properties.
Visio only requires four properties to secure a Portfolio+ loan.
Most lenders require that any single family residential rentals be leased, and any multi-unit properties be 90% leased.
Your rental does not need to be leased to qualify for a Rental360 Portfolio+ loan.
After lending on properties, most lenders require ongoing reporting on factors such as occupancy, vacancy and property maintenance.
Visio knows investors have better things to do with their time and resources, so for the sake of simplicity we don’t require ongoing reporting.
Some lenders require that you have a property manager hired to manage the properties secured by the loan.
Visio does not require you to hire a property manager.
Lockbox Payment Structure
Some lenders institute a lockbox structure for payments to better ensure that they receive payment from their borrowers. A lockbox structure is when rental payments for all properties are put into an account controlled by a third party. The third party is instructed as to who gets paid in what order, with the lender usually being first, leaving the investor with no control of their own accounting. A lockbox is complicated and difficult to set up and is an additional expense that cuts into the cash flow of the properties.
Visio knows it MIGHT make sense for an investor with 50 or more properties to employ a lockbox structure, as it may make management of accounting easier. However, investors with smaller, more easily managed portfolios don’t necessarily need it. So we don’t require it.
Visio’s Rental360 Portfolio+ loan makes it easier to apply for, qualify for and manage your blanket mortgage. It’s just another way we deliver on our promise of being the investor source for fast, simple and dependable loans.
We are a blanket loan lender! Want to know more about our portfolio loan? Click the button below to learn more or get your financing started today.
Editor's Note: This post was originally published in September 2017 and has been updated in October 2020 for freshness and accuracy.