How do banks look at financing for a multiple park portfolio? I looking at buying two parks in the same city in Georgia. Will the banks look at these at two independent properties that have to make financial sense individually, or will they look at the financials together and give one loan?
You could do it either way. Last time we did a 2 park portfolio acquisition, We used two separate contracts and the same bank for both. However the two loans were unrelated. Technically, during the due diligence phase or the financing contingency we could have terminated one of the two contracts but not the other. The seller intended only to sell the two parks together but our contracts were not tied together in any way.
You can do it either way - finance them separately or together. If you have different partners in each, do it separately. If the ownership is the same, I’d seek to finance them together. Either way, the lender will look at the intrinsic value of both parks/operations.
Yes . . . In the fha207m loan guarantee program if the properties are in the same jurisdiction for recording encunbrances, they may be financed using a single mortgage or trust deed and note . . for up to 40 years, non-recourse, fixed rate. If
“Affordable” by community standards, LTV may be as high as 90% only problem is they take 6 months for all documentation.
@Donranderson
I suggest you get two separate loans and form two separate LLCs that are owned by a third LLC in a Holding Company.
In 40 years of business, we have only done one Blanket loan, and boy did we regret it. One park did great. It was a senior park and in 2008 everyone paid their rent, but the family park did not do very well at all. The park was in Ohio and the Family park had a huge vacancy problem as there were no jobs.
Since the loan was connected to each property the DSC ratio used included both parks. The Senior park was fine but the family park SUCKED. We had to buy down the whole note by $1.2MM to make the bank happy.
If we had two different loans we would have only had to buy down the loan on the Family park by approximately $400K.
There are many additional reasons not to do a blanket loan.
Here is a good article for you to read.
AW
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That is a great point that you made. At the further extreme, if one property goes bankrupt, you will lose both instead of just one if they are financed together.
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Thank you for all your thoughts. It sounds like the way to go is to see if both parks can qualify for separate loans.