I am interested in purchasing residential rental property in either Chicago or Milwaukee via an LLC. I will need financing, which brings me to my question. Does anyone have a recommendation for a lender that would provide a non-recourse loan? Would the big banks (Chase, Wells Fargo, etc) lend to an LLC with a non-recourse loan, or should I shop around with small local banks?
It's unlikely that you'll find a non-recourse loan for a single family residence. Quite the opposite, lenders will not only require recourse, but also a personal guarantee from you. This is true with most banks, large and small. If you can find a lender to do it non-recourse, it would likely have to be a very low LTV.
It's possible to get non-recourse loans for portfolios of multiple homes from the likes of B2R, Colony, et al. It's also available for Multifamily, most commonly with loan amounts over $1MM to $3MM.
Chris NA Its usually better to seek a private lender that will be asset based. Try your local meet-ups. Seems they are in swarms in the CA market.
Thank you for your input @Brian Burke @Tony Hardy and @Tiger M. To provide more specific details, the property(s) I'm considering are 2-4 unit properties. I have considered a recourse loan with a personal guarantee, however, I have read that a personal guarantee would provide a loop hole in legal situations which might destroy the whole purpose of forming a corporation. To be specific, my personal guarantee on a recourse loan would create the potential to put my private assets in jeopardy in the case of a lawsuit. Therein lies my dilemma.
Chris NA True but only if you default. If your concerned about default, may want to reconsider the project.
The PG doesn't strip the limited liability nature of the LLC except as it applies to the lender's remedies if you default on the loan. If someone falls off the roof and sues, they can't go after your personal assets outside of the LLC simply because you have a personal guarantee on your financing. Besides, those risks are why you buy insurance.
Did you do a net search? I did and found some.
We always ask about non-recourse lending for any new investment. So far, no takers on the bank side for a property of less than 50 units. On smaller loans, non-recourse simply does not exist.
Thank you for the clarification, gentlemen. I am absolutely not planning on defaulting on the property(s) I have in mind. In fact, I follow the "If you can't make the monthly payments during vacancy, then you shouldn't own the property" motto. My main concern was in regard to the "accidental" slip scenario. Your feedback is enlightening. I do plan to purchase umbrella insurance for any investment property as well
I've not done a net search yet, but that would be an obvious step. I thought I'd ask the forum first to get "real" feedback and a little background info prior to sifting through the Google returns.
I ask because we are not allowed to list actual non-recourse providers here on BP but if you send me a message I will send you some company names.
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