The best blanket loan isn't just about today's financing—it's about tomorrow's opportunities. Smart investors structure their blanket loans with clear exit strategies, ensuring maximum flexibility as their portfolios evolve.
Understanding Your Exit Options
Unlike traditional single-property loans, blanket loans offer multiple exit pathways:
Individual Property Sales via Release Clauses
The most common exit strategy involves selling individual properties while maintaining the blanket loan on remaining assets.
This requires properly structured release clauses negotiated upfront. Typical release prices range from 100-125% of the property's allocated loan amount, allowing you to:
- Harvest appreciation from strong performers
- Dispose of underperforming assets
- Rebalance your portfolio composition
- Generate capital for new opportunities
Portfolio Refinancing
As your properties appreciate and market conditions change, refinancing the entire blanket loan can:
- Reduce interest rates in favorable markets
- Extract equity for new investments
- Restructure terms to match evolved strategies
- Consolidate additional properties into the loan
Complete Portfolio Sale
Sometimes the best exit is selling everything together.
Blanket loans can actually facilitate portfolio sales by providing:
- Clean, simple financing for assumption
- Attractive terms for qualified buyers
- Simplified due diligence processes
- Potential for premium pricing on turnkey portfolios
Timing Your Exit Strategy
Market timing significantly impacts exit success. Consider these California market factors:
Interest Rate Environment
Rising rates make existing low-rate blanket loans valuable for assumption. Falling rates create refinancing opportunities. Plan your exit strategy around rate cycles.
Property Type Cycles
Different property types peak at different times. Your blanket loan should allow you to sell retail properties during retail strength while holding multifamily through its cycle.
Tax Implications
California's tax environment affects exit timing. Coordinating property sales with tax planning can significantly impact net returns. Consider:
- Capital gains timing
- 1031 exchange opportunities
- Depreciation recapture
- California state tax implications
Structuring for Maximum Flexibility
The key to successful exits starts at origination:
Negotiated Release Provisions
Don't accept standard release clauses.
Negotiate:
- Specific release prices for each property
- Clear approval timelines
- Minimal conditions for release
- Rights to substitute properties
Assumption Capabilities
Include provisions allowing qualified buyers to assume your loan. This creates additional value when selling properties or portfolios.
Prepayment Flexibility
Understand prepayment penalties and negotiate windows for penalty-free refinancing. Step-down penalties are preferable to yield maintenance.
Common Exit Strategy Mistakes
Failing to Plan for Success
Many investors don't anticipate rapid appreciation. If your properties double in value, can you access that equity without selling everything?
Ignoring Market Cycles
Blanket loans typically have 5-10 year terms. Consider where market cycles will be at maturity when structuring your loan.
Overlooking Transaction Costs
Release clauses might require paying 110% of allocated loan amounts plus fees. Factor these costs into your return calculations.
Creating Your Exit Strategy Plan
Document your exit strategy before closing:
Identify Hold vs. Sell Properties Determine which properties are long-term holds versus candidates for near-term sale
Map Market Timing Project when different properties might be sold based on market cycles and investment goals
Calculate Release Economics Model the financial impact of releasing each property at various price points
Plan for Contingencies Develop backup strategies if market conditions change
Working with Capital Direct Funding
At Capital Direct Funding, we structure blanket loans with your exit strategy in mind. We'll help you:
- Negotiate favorable release clauses
- Structure appropriate loan terms
- Plan for portfolio evolution
- Maximize flexibility for future opportunities
Your exit strategy is as important as your entry.
Contact us at (626) 796-1680 or visit capitaldf.com to discuss structuring a blanket loan that grows with your portfolio.