small no-recourse loans?

12 Replies

Hi, 

Lately I have been buying real estate out of my solo401K and I would like to buy more using a no-recourse loan (which is the only kind the IRS will allow in this kind of account.) My problem? The banks offering no-recourse loans will only issue loans of 50K or more with the  borrower paying a 40% down-payment. I buy property in the 30-35K range. Mind you, I'm talking about 3bdrm 2ba houses with a two-car garages on 1/4 lots which I then rent for $800-$850. These houses are in the same neighborhood where I live.  Does anyone know how to get no-recourse loans for properties in this price range? 

Susan 

I do small non-recourse hard money loans for fix and flip with high interest rate & points.  So, if you're willing to pay a high enough rate, I'm guessing there will be some private money out there.

I know of one hard money lender who will do a $25,000 loan 50%-60% LTV for 10 year terms at 13%+. Your loans will still fall under their minimum, if there's opportunity for repeat business, you never know if they might make an exception.

PM me if you want their name.

Thanks. Right now I'm not flipping, I'm renting. I'll let you know if I need your lenders name. 

@Susan Maneck

The lender I was referring to does loans for buy & hold investors with a 10 year term.

They aren't my lender, my last post was a bit confusing. I am the HML lender on the fix and flips, I mentioned, not the borrower. I don't use this lender. Just know of them.

If you have more than one property, consider a blanket loan at the bank rates! Good luck :)

@Phil G. thanks for the post. That is good info, but also a high price tag to pay for a buy & hold investor. Are there any other lenders out there that do Non-Recourse for deals under $50k? I think its a valid question because the markets I operate in you can get SFR or Multi for $50k that rents $800-1000/mo. I am guessing that the answer to that is to find a private investor/lender who wants to do a deal like that?

Originally posted by @Bill Gulley :

If you have more than one property, consider a blanket loan at the bank rates! Good luck :)

 Yeah, but from what I've heard they still expect each property to be worth more than 50K. For instance, if you have a fourplex it should be worth more than 200K. 

@Bryan C.

I've been told be a loan officer at one of the national IRA lenders that they sometimes will make an exception and do a loan in the $40s, so it may be worth a call if you're just under the $50K. There are also some regional lenders that will do loans less than $50K. A $20K or $25K loan will be more difficult to find.

@Susan Maneck

It's not per unit, so a fourplex @60% LTV and $50K minimum loan would need to sell for $83.3K. SFR they'll typically do 70% LTV.

private lenders including IRAs will do small non recourse loans. You can ask friends, especially those with money in CDs at low rates, if they would like to triple their interest rate which usually gets you  3-5% rates. You can also combine multiple properties together in one loan to increase the total loan value.  @Susan Maneck hope this helps. 

@Susan Manek

Your best bet is to find other solo 401k and/or IRA investors that would be welling to lend to your solo401k.

Originally posted by @Susan Maneck :
Originally posted by @Bill Gulley:

If you have more than one property, consider a blanket loan at the bank rates! Good luck :)

 Yeah, but from what I've heard they still expect each property to be worth more than 50K. For instance, if you have a fourplex it should be worth more than 200K. 

Not really true, get with a small local bank or regional bank that does commercial financing.  You could have 10 $40,000 properties to pledge and obtain a blanket loan. :)

Most local banks won't do no-recourse loans into a solo401K. In any case, my solo401K only has two properties in it right now. My other houses are outside a 401K. 

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