Sustainable investing is changing the game for smart money managers. You might think it’s just about feeling good, but it’s more than that. Sustainable investing can boost your returns while helping the planet and society. It’s a win-win that more people are catching onto. Let’s break it down. When you put your cash into companies […]
A reader wants to know how a term insurance payout should be invested for the family’s welfare upon his demise. As is well known, a term insurance plan only pays out on the insured’s death (usually a breadwinner). First, we (the insured) must ensure that the (bereaved) family typically does not need to dip into…
The post How to invest a term insurance payout appeared first on freefincal.
Politicians don’t control the stock market.
When stocks go up presidents get too much credit and when they go down they get too much blame. It’s mostly circumstantial depending on the timing of cycles and such.
But the markets move faster than ever these days. Investors are constantly pricing in the future, sometimes right, sometimes wrong, yet never in doubt.
The stock market was already up big heading into t…
Weekend Reading – JP Morgan Guide To Markets & Risk Parity Strategies
Weekend Reading is a collection of Investment Research and Lifestyle topics from all corners of the Web. We source the highest quality insights from Wall Street and Main Street that you may apply to your investment process. Unlike the rest of Bankeronwheels.com, this series is provided without additional guidance. As usual, everything is to be used at your own risk. Below is the type of content we shortlist:
Desire is a contract that you make with yourself to be unhappy until you get what you want.
Featured
As Bitcoin hits new all time highs, and Bitcoin ETFs break flow records given a wave of potential deregulation on the horizon it’s time to reassess its merits. Bitcoin is contentious amongst our readers. According to our survey, only half of you have an allocation. That’s the way it should be – the best strategy is the one you understand and can stick to. So, while it may be worth exploring for the adventurous investor profiles, it’s not a fetch for most Golden Retrievers. Today, let’s look at the limited data and try to make sense of this asset from a portfolio perspective.
Portfolio Construction
Asset Allocation
One of my cardinal rules of investing is that politics and money management don’t mix. As passionate as you may feel today, trading based on elevated political emotions is a choice you’ll most likely live to regret. That said, I’ve seen a lot of talk in the aftermath of the recent US presidential election about how it may impact the markets in the near future. And frankly, there are some really bad takes out there. While I don’t do politics, I still feel the responsibility to offer a constructive perspective helping people navigate their feelings regardless of who they voted for.
Understand Financial Markets
Featuring insightful data visualizations and expert analysis, the JP Morgan Guide to the Markets provides a comprehensive overview of key market trends, economic indicators, and investment opportunities. The Guide to the Markets is designed to help you make informed decisions by offering a clear, concise view of the forces shaping the market landscape today.
In this episode of Excess Returns, we sit down with Larry Swedroe to tackle some of the most pressing issues in investing today. We dive deep into topics that are on many investors’ minds, including:
– Is value investing still effective in today’s market?
– How is the rise of passive investing impacting market efficiency?
– Should we be concerned about market concentration?
– Is international diversification still important? We explore the importance of maintaining a long-term view, the dangers of recency bias, and why Larry believes hyper-diversification across multiple asset classes may be beneficial for investors.
When I don’t know how to process uncertainty, I refresh this chart. I spent the weekend reviewing research literature, the range of outcomes are truly wide from here.
How To Invest
Active Investing
Factor Investing
Discretionary Investing
Alternative Asset Classes
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The Bitcoin Factor (Rogersplanning)
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Crypto Deregulation: ‘golden age’ as Trump win fires up industry (FT)
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We’re living in the golden age of gold (sherwood news)
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Different Types of HF Strategies Provide Varying Diversification Benefits
(Franklin Templeton)
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Foreign buyers eye Japan’s empty houses with millions available for cheap — but experts warn of risks (CNBC)
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Wall Street Math Wizards Are Decoding Private-Market Returns (Bloomberg- Paywall)
Wall Street
Bad Bets
ETFs
UCITS ETFs
WisdomTree has launched its second efficient core ETF in Europe providing leveraged exposure to a traditional global 60/40 portfolio. The WisdomTree Global Efficient Core UCITS ETF (NTSG) is listed on the Deutsche Boerse and Borsa Italiana with a total expense ratio (TER) of 0.25%. The ETF will list on the London Stock Exchange as well. NTSG seeks to replicate the performance of a proprietary index, the WisdomTree Global Efficient Core index.
US ETFs
Wealth Management
Personal Finance
Income tax rates in Europe vary widely and reflect different approaches to funding public services, with countries imposing higher top marginal tax rates often supporting extensive social welfare systems, while those with lower rates may prioritize competitiveness or maintain less comprehensive programs. This map shows the top statutory personal income tax rate of 36 European countries.
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Your Money or Your Life (Book Review) (Banker on Wheels)
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A Journey Beyond Wealth to Connection, Growth, and Intentional Living (ChooseFi)
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Big inheritances can be a sign of underconsumption and suboptimal planning. (Morningstar)
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14 Lessons About Money & Life From 40 Years of Living (Mr. Stingy)
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When Earning More Makes Your Financial Anxiety…Worse? (moneywithkatie)
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(Early) Retirement
For anyone who has established a meaningful professional identity over a decades-long career, retirement represents a huge—and potentially wrenching—transition. While some people navigate it well, many struggle. The contrasting experiences of Irene and Lawrence, two knowledge workers at different companies, and from those of the many other people we studied, can help ease this major life change.
Financial Advice
Design Your Lifestyle
Personal Development
Derren Brown is a psychological illusionist who can predict, suggest, and even control human behavior. We discuss: Derren’s transition from student to magician, Hypnosis, mentalism, and cold reading, How learning magic influenced Derren’s skepticism and faith, Finding meaning, Why Derren takes care not to abuse his superpowers in real life, A new belief or habit that has improved Derren’s life.
Careers & Entrepreneurship
Travel
In this piece, Ana Zamorano Ruiz reflects on her recent bikepacking trip across Morocco and the unique connections she’s formed with other women despite cultural and language barriers. Morocco is always a perfect destination, even if only for an extended weekend. Its proximity to home—just a two-hour direct flight from Bilbao—makes it irresistible to hop on a plane and experience this uniquely diverse country.
Tech & Economy
Economy
Tech & Science
And Finally
Thank you for reading.
Good Luck and Keep’em* Rolling!
Good Luck and Keep’em* Rolling!
(* Wheels & Dividends)
Weekend Reading – JP Morgan Guide To Markets & Risk Parity Strategies
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Bitcoin in Your Portfolio: A Potentially High-Reward Asset If Rebalanced – But Beware of Black Swans
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Our Review Of The Best MSCI World ETFs
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Interactive Brokers – How To Identify Stock Exchanges In Europe?
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Your Money or Your Life (Book Review)
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Are you and your partner part of the DINKS (Dual Income, No Kids) lifestyle? If so, now is the perfect time to explore ways to grow your wealth without the heavy upfront costs. Passive income ideas with no money can provide financial freedom, allowing you to save for the future or even achieve early retirement. Here are five creative and effective ways to get started.
1. Leverage Affiliate Marketing for Steady Earnings
Affiliate marketing is one of the most accessible passive income ideas with no money required to start. As a couple, you can create a blog or social media account around a shared interest and recommend products or services to your followers. Companies like Amazon, ShareASale, and ClickBank offer affiliate programs where you earn a commission for every sale made through your unique link. With a bit of creativity and consistent posting, you can turn your hobbies into a profit-making venture. Plus, this strategy requires only your time and internet access, making it a low-barrier opportunity to earn.
2. Rent Out Your Spare Resources
Many DINKS couples have extra assets they can leverage, such as a spare room, a car, or even a parking space. Platforms like Airbnb, Turo, or Neighbor make it easy to monetize these resources. If you’re not comfortable with hosting guests, renting out your driveway or garage for storage is another hassle-free option. By utilizing what you already have, you can generate a consistent stream of income without upfront costs. It’s an excellent way to maximize your unused resources while meeting new people or serving your community.
3. Dive Into Print-On-Demand Products
Print-on-demand is a trendy and straightforward way to create passive income. Using platforms like Teespring, Redbubble, or Printful, you can design T-shirts, mugs, or tote bags and sell them without holding inventory. You upload your designs, and the platform handles production, shipping, and customer service. If either of you enjoys graphic design or has artistic skills, this could be a fun and rewarding side hustle. Even better, it’s a business model with virtually no upfront investment, perfect for a DINKS couple looking to explore creative pursuits.
4. Monetize Digital Products
In the digital age, selling eBooks, courses, or printable templates is a booming market. As a couple, you can combine your expertise to create value-packed digital products that others can purchase and download. Whether it’s a guide to fitness, cooking recipes, or budget planners, platforms like Gumroad and Etsy simplify the process. Once your product is created, it can generate passive income for years with minimal maintenance. This idea not only diversifies your income but also lets you share your knowledge with a broader audience.
5. Earn Through Dividend-Paying Stocks
If you already have a little saved up, consider investing in dividend-paying stocks. Many companies pay regular dividends to shareholders, providing a steady passive income stream. Start small by using apps like Robinhood or Webull to purchase shares and reinvest your earnings to grow your portfolio. While this option does involve a learning curve, numerous free online resources can guide you through the basics of investing. Over time, this strategy can compound into significant wealth, especially when started early.
Start Building Your Passive Income Today
Every DINKS couple has a unique opportunity to build wealth by exploring passive income ideas with no money upfront. Whether you tap into affiliate marketing, rent out spare resources, create digital products, or invest in dividends, the key is to start small and stay consistent. These strategies can help you achieve financial freedom while enjoying your current lifestyle. Begin experimenting with one or more of these options today and set yourself up for long-term success. The future you will thank you!
The Big Picture On Rent To Retirement:
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- Investing in rental properties can provide a stable income for retirement, with options like steady monthly rent, lump-sum cash from sales, and equity loans. This makes it a sustainable alternative to traditional retirement funds.
- Rental income can enhance retirement stability, allowing for regular cash flow even after the property mortgage is paid off. Additionally, selling the property or borrowing against equity can provide financial flexibility when needed.
- While real estate investment offers significant retirement advantages, consider factors like property management, tax implications, and long-term planning for sustainable benefits.
Disclaimer
The information provided on this website is for general informational purposes only and should not be construed as legal, financial, or investment advice.
Always consult a licensed real estate consultant and/or financial advisor about your investment decisions.
Real estate investing involves risks; past performance does not indicate future results. We make no representations or warranties about the accuracy or reliability of the information provided.
Our articles may have affiliate links. If you click on an affiliate link, the affiliate may compensate our website at no cost to you. You can view our Privacy Policy here for more information.
(Guest article by Michelle Cornish, CPA)
Most North Americans aren’t on track for retirement, according to a recent survey conducted by Bankrate.
I spent sixteen years working in public accounting, where I helped people with their taxes and retirement planning. Over and over, I found that people fear they haven’t saved enough for retirement. Nearly everyone wonders, “Do I have enough?” “How do I know my 401k won’t run out?” and “What happens if the stock market crashes right after I retire?”
The good news is that there is more than one way to retire comfortably. One way is to start investing in rental properties before retirement.
Consider three of the ways rental properties can ensure a comfortable retirement:
- Steady monthly income,
- Lump sum cash payout, and
- Equity loans.
Stocks typically must be sold to supplement retirement income, and bonds eventually finish paying out. In other words, traditional nest eggs risk running empty at a certain point, but rental properties keep paying indefinitely.
Why Rental Properties Make Smart Retirement Assets
Let’s dive in and take a closer look at these advantages of rentals for retirement, shall we?
Steady Monthly Income
Rental income is a great supplement to other income you may have in retirement. It can even provide the bulk of your retirement income!
Ideally, you’ve owned the property long enough that the mortgage is paid in full. This increases your monthly cash flow because you don’t have to worry about paying the mortgage out of the rental income you receive.
If the property has been well maintained over the years, then your only major repair bills should be CapEx (capital expenditure)-related. You can also increase the rent to raise yourself. Just ensure you stay within the confines of your local and state landlord-tenant laws. There are often rules regarding how often you can raise the rent and by how much.
If you feel like being a landlord is too much work, consider whether you’d rather bust your butt to contribute to that 401k… or find a job that even has a 401k plan. There are tons of great resources for landlords to help make it simple. Check out this landlord survey with many great tips, including 5 critical factors to consider when screening tenants.
Important Financial Aspects of a Rental Property Investment
Thoughtful planning around these aspects of rental property ownership can help create a more stable retirement income stream.
| Considerations | Impact on Retirement Planning |
| Property Management Options | Hiring professionals reduces time commitment but affects income |
| Tax Advantages | Multiple potential deductions available for rental property owners |
| Emergency Fund Planning | Essential to maintain reserves for unexpected vacancies |
| Insurance Requirements | Additional coverage needed compared to standard homeowner policies |
| Long-term Wealth Building | Benefits from both rental income and property appreciation |
| Location Strategy | Property values and rental demand vary by neighborhood and region |
| Maintenance Schedule | Regular upkeep helps prevent costly repairs and maintains property value |
Lump Sum Cash Payout
Unlike lump sum pension payouts, when you own rental property, it’s up to you when you receive a lump sum payout. A lump sum payout from real estate investing occurs when you sell your property. The payout amount will depend on how much the property has gone up in value, how much of the mortgage you have left to pay, and how much capital gains tax you will owe on the sale. However, in the U.S., long-term capital gains tax rates (0%, 15%, or 20%) apply depending on the household income.
Here are ten things you can do yourself to increase the value of your property as much as possible.
Tax laws can vary depending on where you’re located, so consult with a tax professional before your sale is complete or even before you decide to sell the property.
Be sure to consider timing and taxes before selling any properties. If you own more than one rental property, you may want to time the sales so they end up in different taxation years so you can save the most tax (and keep the most cash) from each sale.
Equity Loans
If you have equity in your rental property but are not ready to sell yet, or if you’d prefer to pass the property on to your heirs but still need a quick influx of cash, you can always borrow against the property’s equity. This can be a risky move, though, so make sure you know what you’re getting into before you do it.
A major advantage of an equity loan is that it’s not considered income, so you won’t be taxed on it. But you need to pay it back with interest, so proceed cautiously.
You’ll also want to know what will happen to the debt when you die, especially if your goal is to pass the property on to your heirs. A required loan payout on death (like in a reverse mortgage situation) may force your family members to sell the property, which is not what you want.
If you are considering borrowing against your rental property, do so cautiously. It’s critical to fully understand the contract terms, required repayments, interest rate, and what happens to the loan when the property transfers to your heirs. Work with a reputable lending professional you know and trust, or get a referral and triple-check their references.
How Many Properties Do You Need for Retirement?
Let’s tackle the question that keeps many aspiring real estate investors up at night – how many rental properties do you actually need for a comfortable retirement? The answer starts with understanding your target monthly income. Calculate your expected monthly expenses in retirement, then add a 20% buffer for unexpected costs and inflation.
A practical approach is to work backward from your target monthly income. For example, suppose you need $5,000 monthly in retirement income, and each property generates an average of $500 in monthly cash flow after all expenses. In that case, you’d need approximately 10 properties to reach your goal. However, remember that property values and rental rates vary significantly by location.
To calculate potential cash flow, use this simple formula:
Monthly Rent – (Mortgage + Property Taxes + Insurance + Maintenance Reserve + Property Management) = Monthly Cash Flow.
For instance, a property renting for $2,000 monthly might have $1,500 in total expenses, which leaves you with $500 in cash flow. To be conservative in your calculations, factor in vacancy rates of 5-10% annually.
Finding Properties That Actually Earn
I’ve noticed that investors who take their time choosing properties usually come out ahead. Let me share what I’ve learned about picking the right properties for retirement income.
First, you want to look at the neighborhood’s future, not just its present. Is the area growing? Are new businesses moving in? When will these changes occur? These kinds of changes can mean good things for your property values and rental rates down the road. Many investors I know make good money just by spotting these trends early.
As for the property, consider the big-ticket items that can affect your retirement income. How old is the roof? What about the HVAC system? Although these aren’t very exciting questions, they’re important ones. Trust me, the last thing you want is to drain your retirement savings on major repairs when you should enjoy that rental income.
Also, there are other factors you can consider – who are your future tenants likely to be? Are you near a university that ensures a steady stream of renters? Or, maybe you’re in a family neighborhood where tenants tend to stay longer? Knowing this helps you choose properties that will keep bringing in that steady income.
So, take your time, do your homework, and remember that each property is a long-term part of your retirement plan.
Smart Ways to Finance Your Rental Portfolio
I’ve seen investors use several different approaches, and each has its place in your retirement strategy.
Traditional mortgages are what most people think of first, and they’re certainly common for a reason. You’ll typically need to put down 15-25% of the purchase price. While this might seem like a lot of cash upfront, it’s actually a great way to leverage your money to control a more valuable asset.
Another one is the self-directed IRA accounts; they let you use your retirement funds to invest in real estate. It’s a great option if you’ve already built up some retirement savings but want to redirect them into rental properties. Just be careful, though—there are strict rules about using these properties, and you’ll need to work with a qualified custodian.
And then there’s the 1031 exchange – an option I’ve seen many successful investors use. Think of it as trading up your properties without taking a tax hit right away. You can sell one property and buy another of equal or greater value while deferring those capital gains taxes. However, always consult with a tax professional (as I always told my clients) before entering a 1031 exchange, as the rules can be tricky.
What About Reverse Mortgages?
A reverse mortgage works differently than an equity loan. Generally, you borrow against the property’s equity with a reverse mortgage, like a home equity loan. However, unlike a home equity loan, the balance of the reverse mortgage goes up over time instead of down, which is why a payout is required when you die.
You can’t get a reverse mortgage on a rental property, but you could get a reverse mortgage on your own home and use that to purchase a rental property if you’re late to the retirement game and wish you had purchased one when you were younger.
Still, you could probably accomplish the same thing with a home equity loan at a lower interest rate. Be sure to research your options carefully.
It’s important to make sure a rental property is the right investment for you. Before investing, ensure you understand how to calculate your net cash flow from the rental to avoid a bad investment.
Of course, as a CPA, I have to mention tax consequences. They are always there, lurking in the background. Rental properties come with some excellent tax deductions, but when it’s time to sell, be prepared to pay the tax collector. To be perfectly safe, contact tax consultants for changes, as they happen all the time and it can be hard to keep on top of all of them.
Before you get carried away with your real estate investing, read these important lessons and always check with a certified tax professional who knows the ins and outs of real estate investing to ensure you’re getting the most up-to-date tax advice possible. Tax laws change constantly, and you don’t want to be caught off-guard!
I want to know more about…
The post Rent To Retirement: Building Wealth Through Rental Properties appeared first on SparkRental.
Setting up a first investment property can be exciting but also overwhelming, especially if it’s your first time. Many people dive in with high hopes of quick profits but quickly find that managing an investment property is more complex than they anticipated. Without careful planning, new investors can run into costly pitfalls.
From misjudging finances to overlooking hidden costs, first-time investors should be cautious and informed. Here’s a guide to avoid common mistakes and make the journey to owning a successful investment property smoother and more profitable.
Source: Unsplash(CC0)
Not setting a realistic budget
One of the biggest mistakes new investors make is underestimating the costs involved in setting up a property. They might think the property price and a few minor repairs are all that’s needed, but in reality, expenses can quickly add up. Things like insurance, property taxes, maintenance, and emergency repairs are often overlooked, causing financial stress down the road. Creating a realistic budget that includes these hidden costs is essential.
In addition, skipping on reserve funds is a risky move. Having a financial cushion allows owners to handle unexpected issues like a broken heater in the winter or sudden tenant turnover. Always overestimate your budget slightly to be prepared for the worst.
Ignoring financing options
Financing an investment property is more complex than a traditional home loan, and many first-time investors don’t fully understand their options. It’s essential to research options like a DSCR loan, which considers the property’s cash flow rather than the buyer’s income. This type of loan can be a good fit for those looking to expand their portfolio quickly.
Choosing the wrong financing option can lead to high interest rates and heavy debt, which may eat into profits. Understanding and comparing different loan types can make a massive difference in long-term success.
Focusing only on high-end properties
Many new investors dream of owning a luxury property, thinking it’ll attract high-paying tenants. However, luxury properties come with their own set of challenges, including higher maintenance costs and a smaller pool of renters. High-end properties may sit empty longer if a high-paying tenant isn’t available, which affects cash flow.
Instead, looking at more affordable properties in popular rental areas often yields a steadier income. Mid-range properties are easier to rent, easier to maintain, and generally offer a better return on investment for first-timers.
Poor property management
An investment property is only as good as its management, yet many new investors overlook this aspect. Failing to maintain the property, respond to tenant concerns, or keep up with repairs can quickly turn a profitable investment into a burden. Regular inspections, prompt maintenance, and effective communication keep tenants happy and prevent small issues from escalating.
Good property management builds a positive reputation among tenants and can attract referrals, creating a stable, profitable investment for years to come.
So if you’re just getting started with investment properties or are struggling to make them work, we hope that this post has given you a few ideas to help avoid potential pitfalls in the near future.
The post Common Mistakes to Make When Setting up Your First Investment Property appeared first on brokeGIRLrich.
The Big Picture On Blanket Mortgages:
-
- A blanket mortgage consolidates loans across multiple properties, helping real estate investors simplify their portfolio management, reduce closing costs, and potentially negotiate better loan terms.
- By using equity from existing properties as collateral, investors can expand their portfolios without large down payments. This makes blanket mortgages especially useful for buy-and-hold investors, house flippers, developers, and business owners.
- Although blanket mortgages offer benefits like simpler management and reduced costs, they come with pooled risk and shorter loan terms. A default affects all covered properties, and fewer lenders offer them.
Disclaimer
The information provided on this website is for general informational purposes only and should not be construed as legal, financial, or investment advice.
Always consult a licensed real estate consultant and/or financial advisor about your investment decisions.
Real estate investing involves risks; past performance does not indicate future results. We make no representations or warranties about the accuracy or reliability of the information provided.
Our articles may have affiliate links. If you click on an affiliate link, the affiliate may compensate our website at no cost to you. You can view our Privacy Policy here for more information.
Who says you need a separate loan for every single property?
As you scale your real estate portfolio, it can get tricky to borrow and manage individual loans for every residential property. It also limits your financing options and your ability to pull equity out of existing properties.
Enter: blanket mortgages.
What Is a Blanket Mortgage?
A blanket mortgage is a single loan attached to multiple properties. As terms in real estate investing go, the blanket mortgage definition is pretty simple.
For instance, say you come across a seller looking to sell her entire portfolio of eight properties. You could try to arrange eight separate landlord mortgages — or you could negotiate one single mortgage that covers all eight properties.
Note that the lender attaches a lien against each property. If you default on your mortgage payment, they file for foreclosure on all secured real estate properties.
Lenders usually include a partial release clause with blanket loans to cover the event of the borrower selling one property. Unlike traditional mortgages, you don’t have to repay the entire loan when you sell a property. Typically, the seller repays a proportionate percentage of the loan balance or allows the borrower to put the sale proceeds toward buying a replacement property (which the lender places a new lien against). Think of it like a 1031 exchange for your blanket loan.
Some investors refer to blanket mortgages as portfolio loans, but portfolio loans have another definition: loans held privately on a lender’s portfolio. That’s opposed to being sold off to huge financial institutions like traditional mortgage loans are.
However, as simple as the blanket mortgage definition, its uses and applications get more nuanced.
What Else to Know About Blanket Mortgages
For some real estate investors, blanket mortgages’ flexibility and streamlined nature make them an attractive financing option compared to juggling multiple traditional loans.
| Aspects | Details |
| Best Suited For | Large-scale property investors and developers |
| Documentation | Simplified compared to multiple individual mortgages |
| Closing Costs | Lower than getting separate mortgages for each property |
| Main Advantage | Single monthly payment for multiple properties |
| Key Requirement | Properties must meet the lender’s minimum value criteria |
How to Use a Blanket Mortgage
Homeowners don’t typically use this type of loan. Most traditional home loans backed by Fannie Mae and Freddie Mac don’t allow cross collateralization for primary residences or second homes.
However, investors who may own dozens of properties need to understand a blanket mortgage and how to use it effectively.
Buy-and-Hold Investors
Landlords who buy and hold real estate can use blanket loans in several ways.
To begin with, landlords can use a blanket mortgage to buy a portfolio of properties all at once, as in the example above. Alternatively, rental investors can use a blanket landlord mortgage to avoid coming up with a down payment.
It works like this: imagine you have an investment property worth $150,000 with an $80,000 mortgage. If you want to buy another property for $150,000, the lender requires a 20% down payment. Rather than come up with $30,000 in cash for the down payment, you offer your equity in your existing property as part of a blanket loan.
The lender puts a second lien against your existing property and attaches a lien against the new property you buy. Thus, they have liens against two properties, so if you default, they foreclose on both.
It’s another way to tap equity in your existing properties beyond refinancing or taking out a HELOC against a rental property.
Speaking of refinancing, some property owners refinance several separate loans into one blanket mortgage. In doing so, they consolidate into one loan, possibly with a lower interest rate or a more favorable term.
House Flippers
Investors who flip houses can also use blanket loans to buy multiple properties at one time under one loan.
They don’t have to pay off the entire mortgage as they complete the renovations and sell off each property. They either pay the loan balance or buy an additional property under the blanket loan.
Real Estate Developers
Similarly, property developers use blanket real estate loans to buy large tracts of land, which they subdivide and then build on.
They sell individual plots one by one and either pay down their loan balance or acquire new tracts to place under the blanket loan.
Business Owners
Businesses buying several new locations often use a blanket mortgage. It works just like a residential mortgage, with one loan covering several commercial buildings.
Or, businesses can offer up existing properties with equity as additional collateral to avoid a down payment.
Finally, businesses can refinance multiple commercial mortgages into one blanket loan. It works the same way for them as for residential landlords.
Who says you need a separate loan for every single property?
As you scale your real estate portfolio, it can get tricky to borrow and manage individual loans for every residential property. It also limits your financing options and your ability to pull equity out of existing properties.
Enter: blanket mortgages.
Some investors refer to blanket mortgages as portfolio loans, but portfolio loans have another definition: loans held privately on a lender’s portfolio. That’s opposed to being sold off to huge financial institutions like traditional mortgage loans are.
However, as simple as the blanket mortgage definition, its uses and applications get more nuanced.
Pros of Blanket Mortgages
As with everything else in investing (and life), blanket real estate loans have their fair share of pros and cons.
Make sure you understand both before committing to this type of financing!
Lower Closing Costs
Every time you hold a real estate settlement, you incur closing costs. Buying, selling, and refinancing all involve thousands of dollars in closing costs.
So, rather than holding five different settlements when you buy a portfolio of investment properties, why not hold one?
Lenders charge flat fees in addition to points (based on the loan amount). By taking out a single mortgage rather than five, you only pay one set of flat fees.
The same principle applies to title fees—while title companies charge by the title search, they also charge many flat fees per settlement. Doing one settlement means paying one set of those fees.
More Negotiable Loan Terms
When you take out ten garden variety $200,000 landlord mortgages, you don’t have much negotiating power with any of them.
They pay more attention when you approach a blanket mortgage lender about a $2 million loan. They want your business.
Plus, it involves less work for more money on the lender’s part. They only have to process and underwrite one loan, not five or ten.
This means borrowers can often negotiate a lower interest rate, lower points, or otherwise favorable loan terms, which can, in turn, mean better cash flow and higher returns on their properties.
Simpler Money Management
If you only have one loan to pay and manage each month, rather than 10, 20, or 50, it keeps your accounting simpler.
In contrast, keeping track of dozens of monthly mortgage payments can confuse you and your books.
Avoid Down Payments by Tapping Equity
Real estate investors can use a blanket mortgage to buy properties with no money down if they offer up existing properties with equity as additional collateral.
No refinancing is necessary, no HELOC, and no selling your existing properties to fund future purchases.
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Cons of Blanket Loans
Blanket mortgages come with downsides, too, not just perks. Remember the following as you consider taking out a blanket real estate loan.
Pooled Risk
First and foremost, when you pool multiple assets under one loan, you pool a certain amount of risk.
If you default, you lose not one property but all the individual properties under the blanket loan to foreclosure.
If you keep your loans separate, then you also isolate each one. You can default on one loan and only risk losing that one property.
Shorter Loan Terms
Blanket mortgage loans often come with short loan terms, often 10 or 15 years. Those may be amortized over just 10 or 15 years, with monthly payments calculated accordingly. Or the monthly payments may be calculated on a longer amortization schedule with a balloon payment due after 5-15 years. (A balloon payment requires the loan to be paid in full, even though the monthly payments were calculated on a longer schedule.)
In contrast, residential mortgage loans usually allow up to 30-year terms, and commercial property loans typically allow up to 25-year terms. These longer terms mean lower monthly payments and more flexibility when paying off your loan.
Short-term loans can add interest rate risk, which is the risk that financing will cost more by the time the balloon “pops.”
Fewer Lenders Offer Blanket Mortgages
Not all lenders offer blanket loans. In fact, most don’t.
Conventional mortgage lenders following Fannie Mae or Freddie Mac loan programs don’t typically allow blanket mortgages.
Many portfolio lenders — who keep their loans in-house on their books rather than selling them — don’t allow them either. Portfolio lenders come in many shapes and sizes, from local community banks to online lenders like Visio and Kiavi to commercial lenders.
Build your financing toolkit now so you have many lending options before you have an off-market deal lined up that needs to close quickly.
More Lender Scrutiny
Blanket mortgages are more complex for the lender, and because they have a higher loan amount, they are scrutinized more closely.
Lenders may require higher credit scores for these loans or offer lower LTV (loan-to-value ratios) loans. You may end up with the bank manager underwriting your loan rather than the run-of-the-mill underwriter that normally reviews loan files.
Where to Borrow Blanket Mortgages
Since fewer lenders actually offer them, it raises an important question: Where can real estate investors take out a blanket loan?
Start by inquiring with the lenders you already work with. Portfolio lenders who specialize in working with real estate investors often allow them. Here are a few lenders to reach out to:
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- Visio
- Kiavi
- Lending One
- Civic Financial
- RCN Capital
- Lendency (short-term purchase-rehab loans only)
You can also contact local community banks to ask if they offer blanket loans to real estate investors.
Finally, for commercial lenders and construction loans, try out:
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- RCN Capital (commercial & mixed-use)
- Commercial Loan Direct (commercial or construction, minimum loan: $1 million)
- Lendency (construction loans)
Blanket Loan Fees
What do blanket loan fees look like compared to conventional loans or other types of mortgages?
While you’ll probably pay just as much in loan points, you can expect to save money on flat fees. Instead of paying flat junk fees for each mortgage, you only pay one set of fees.
However, you’ll still need to pay appraisal fees for each collateral property.
Blanket Loan Eligibility and Requirements
Unlike traditional home loans, lenders scrutinize these applications much more carefully – and for good reason, given the higher loan amounts and complexity involved.
Most lenders require a minimum credit score of 680, though many prefer 720 or higher. You’ll typically need to show a debt-to-income ratio below 45% and substantial cash reserves—often 6-12 months of mortgage payments for all properties combined.
Experience matters, too. However, it’s not a hard rule. Some lenders may consider first-time investors if they show other strong qualifications.
Your business plan is also useful. Lenders may want detailed financial projections like expected rental income, maintenance costs, and even your exit strategy. They might also look at the properties themselves—most require them to be in good condition and in markets with stable or growing real estate values.
The Process of Getting a Blanket Mortgage
Securing a blanket mortgage takes more preparation than a traditional home loan. Before you start looking for deals, you’ll need to assemble a comprehensive package showing lenders you’re a serious investor.
Start by gathering your paperwork. You’ll need documents like tax returns, recent bank statements, evidence of your rental property experience, and detailed financial records for any existing properties. Have those purchase agreements and property inspection reports ready for new purchases.
The next step is connecting with the right lender. Circle back to the lenders we mentioned earlier, you can start there. Local community banks often offer surprising competitive terms, so pay attention to them. Also, compare rates, terms, and release clause conditions across multiple lenders.
Your formal application comes next, along with that solid business plan showing how you’ll manage these properties profitably. Expect a longer underwriting process—typically 45-60 days. However, it’s worth noting that complex blanket loans can take up to 90 days. The lender will need appraisals for every property involved and will dig deep into your financial background.
You’ll receive a commitment letter spelling out all terms and conditions if approved. This is where having a good real estate attorney pays off – have them review everything before you sign. Once you’re comfortable with the terms, you’ll move to closing, where you’ll sign the final documents and receive your funding.
Tip: Plan for this process to take 60-90 days from funding application. Having your documentation organized from the start can help speed things along, but blanket mortgages simply take longer to process than traditional loans.
Blanket Mortgage FAQs
It’s time to address some frequently asked questions regarding blanket loans. Feel free to reach out to us if you have more questions.
How Do Blanket Mortgages Impact Credit Scores?
The initial hit to your credit score from a blanket mortgage application is similar to any mortgage inquiry. Regular payments can boost your score over time, but remember – a default could damage your credit more severely than defaulting on a single property loan since multiple properties are involved.
Is Refinancing Possible with Blanket Mortgages?
Absolutely. You can refinance into another blanket mortgage or split it into individual loans. The key is timing—look for favorable interest rates and strong property appreciation. Just remember that refinancing multiple properties at once means multiple appraisal fees.
What About Property Management?
Although the mortgage may be combined, you’ll still manage each property individually. Most successful investors use property management software to track separate income and expenses, even though they make one monthly mortgage payment.
Are Blanket Mortgages More Expensive?
Not necessarily. While interest rates might be slightly higher than traditional mortgages, you’ll save on multiple closing costs. The real cost advantage comes from streamlined management and leveraging equity across properties.
Can I Add Properties Later?
Many blanket mortgages allow you to add properties, but it usually requires a modification of the loan terms. Some lenders are more flexible than others, so if you plan to expand, discuss this upfront.
Final Thoughts on Blanket Mortgage
What is a blanket mortgage? Useful, that’s what.
As you scale your real estate portfolio and explore pooled property purchases (say that five times fast), blanket loans can save you money and simplify your books. As you build equity in existing properties, this type of loan offers another way to tap into that equity and avoid down payments when buying additional properties.
Start networking with blanket mortgage lenders before you actually need them, so you can move quickly on your next deal.
How do you plan to use blanket mortgages for your own real estate investments?
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The post Blanket Mortgage: How to Use it as an Investor appeared first on SparkRental.
Investing in real estate can feel like a big step, but multifamily real estate investing offers unique advantages that make it a popular choice. Whether you’re a seasoned investor or just getting started, multifamily properties provide a balance of steady income and long-term growth. Let’s dive into why multifamily real estate investing might be your next smart financial move and explore the benefits that make it a compelling option.
Consistent Cash Flow
One of the biggest draws of multifamily real estate investing is the consistent cash flow it can generate. With multiple units rented out, you have several income streams, reducing the risk of vacancy impacting your bottom line. The reliable monthly income can help cover mortgage payments, maintenance costs, and still leave room for profit. This steady cash flow is a significant reason why many investors choose multifamily properties.
Lower Risk of Vacancy
When you invest in a single-family property, one vacancy can wipe out your rental income. With multifamily real estate investing, the risk is spread out across multiple units. Even if one tenant moves out, the other units continue generating income. This diversified tenant base makes it easier to manage vacancies and keep your investment profitable.
Easier to Finance
It may seem counterintuitive, but banks often view multifamily real estate investing as less risky than single-family properties. The consistent cash flow from multiple tenants can make it easier to qualify for loans. Lenders know that multifamily properties have a better chance of generating stable income. This increased financing availability is a key benefit for investors looking to scale their portfolios quickly.
Potential for Appreciation
Multifamily properties not only provide monthly income but also have the potential to appreciate in value over time. As the neighborhood develops and rental demand increases, the property’s value can rise. Multifamily real estate investing allows you to build equity, which can be leveraged for future investments. It’s a win-win scenario of immediate cash flow and long-term growth.
Tax Benefits
Multifamily real estate investing offers several tax advantages that can boost your overall returns. Investors can deduct mortgage interest, property taxes, and depreciation from their taxable income. These deductions can lower your tax liability, allowing you to keep more of your earnings. Taking advantage of these tax benefits is one of the smartest ways to maximize your investment.
Easier Management
Managing multiple single-family homes can be a logistical nightmare, but with multifamily real estate investing, everything is under one roof. This centralized management approach saves time and effort, making it simpler to handle maintenance and tenant issues. Many investors find it easier to hire a property management company for multifamily buildings, streamlining the process even further.
Scalability for Investors
Multifamily real estate investing is an excellent way to scale your portfolio quickly. Acquiring a multifamily property allows you to own multiple rental units in a single transaction. This can accelerate your growth compared to buying individual single-family homes one at a time. It’s a smart strategy for investors looking to build wealth and expand their real estate holdings.
High Demand for Rentals
The demand for rental properties is on the rise, making multifamily real estate investing a sound choice. Many people prefer renting due to lifestyle flexibility, job changes, or the rising cost of homeownership. This growing demand keeps vacancy rates low and rental income stable. It’s a trend that shows no signs of slowing, providing investors with a solid opportunity for consistent returns.
Diversified Income Stream
Multifamily real estate investing diversifies your income, reducing the risk of relying on a single tenant. With multiple units, the likelihood of all tenants vacating at once is low. This diversification provides a cushion against market fluctuations and economic downturns. It’s a way to safeguard your investment while enjoying multiple revenue streams.
Strong Long-Term Investment
Multifamily properties are often seen as strong long-term investments due to their potential for appreciation, consistent cash flow, and scalability. Holding onto a well-maintained multifamily property can generate passive income for years. It’s an investment that can provide financial security and help build generational wealth. The benefits make it a smart move for those looking to secure their financial future.
Making the Right Investment Choice
Multifamily real estate investing offers a combination of income, appreciation, and tax benefits that can enhance your financial portfolio. With the right approach and a little due diligence, you can leverage these advantages to achieve both short-term and long-term financial goals. It’s a strategic way to diversify your investments and build wealth over time.
The post 10 Key Benefits of Investing in Multifamily Real Estate: Why It’s a Smart Move appeared first on Budget and the Bees.
Discover how holiday marketing tactics, like urgency and emotional appeals, influence your spending and learn actionable tips to stick to your budget and prioritize your financial goals this season.
The post How Holiday Marketing Tactics Can Influence Your Spending (And How to Outsmart Them) appeared first on The Budget Mom.