It is not uncommon for real estate investors to request one loan using many properties as collateral. These types of mortgages are aptly called “blanket mortgages.” The biggest problem, however, with a blanket mortgage is this, how do you sell a property that is serves as part of the collateral pool? It can be tricky, but you can do it if you and the lender set the ground rules clearly in the loan documents up front.
The best way to deal with this scenario is by the use of a “partial release clause.” A partial release clause is wording within the loan documents that sets forth the conditions in which the lender will release the lien on a piece of collateral. Usually, this means that you would have to pay the loan balance down by a certain amount in order to get the lender to release that particular property. Lenders will want to have more collateral value than the balance of the loan, so usually this trigger for release would be a percentage of collateral value vs the loan balance.
Blanket loans are certainly “doable”, but they can also be a pain in the backside when it comes to releasing collateral. Be sure to take the time on the front side to ensure that you have agreed upon language in the loan documents to allow for a partial release of collateral.