Dallas, TX · Member since 2016 · 32 posts · 2 votes
Good afternoon,
I'm new to investing in the Dallas area and have great credit and want to buy, hold and rent property to create an income stream. If someone could give me advice on where to start with the below 3 I'd be very grateful:
- find a lender with good rates who will let me setup structure under LLC/Trusts etc. I've called 2 banks so far and when they do Fannie Mae loans any structure other than personal is out of the question. apparently.
- figure out which property is the easiest to find tenants and most profitable in the area to rent, how to locate it and successfully purchase it with financing (non cash deal).
- I was thinking about doing more short term / furnished places listing on AirBNB & VRBO etc. because my guess these rates would be better than more long term but could be wrong?
It is hard to get financed in an LLC, but a TX company called Visio can help if you get set up with them. You will probably need a hard money lender or a private money lender on the front end.
If you are doing VRBO you need to be in a desirable or tourist location/area. Try to stick close to major metro and hospitals. If you are looking at a normal rental the first few are easier close to home. Look at neighborhoods that are near you and that the rent to purchase ratio is high. I would recommend trying to get a cash flow of $400 or better.
If you reach out to your local REI clubs and a few realtors then can get you lined up with good areas close by.
It is hard to get financed in an LLC, but a TX company called Visio can help if you get set up with them. You will probably need a hard money lender or a private money lender on the front end.
If you are doing VRBO you need to be in a desirable or tourist location/area. Try to stick close to major metro and hospitals. If you are looking at a normal rental the first few are easier close to home. Look at neighborhoods that are near you and that the rent to purchase ratio is high. I would recommend trying to get a cash flow of $400 or better.
If you reach out to your local REI clubs and a few realtors then can get you lined up with good areas close by.
"- find a lender with good rates who will let me setup structure under LLC/Trusts etc."
Hey Chris,
Why are you set on financing via your LLC? A common thing to do is to obtain financing personally and then transfer the property over to your entity. That should open up more doors for you from a funds perspective.
Re: your idea of AirBNB. It could be more profitable, but it's usually riskier (how do you manage the off-season? what happens if during high-season you have three weekends of vacancies in a single month? who will clean and maintain the property between stays?)
The trick with AirBNB is have a plan to get off of the site eventually and have regular clients that come to you directly.
If this is your first rental you might want to try something with less risk.
I've never found an independent bank in Dallas area that didn't have some sort of program for LLC. I do not call credit unions or big banks like chase/capital one. You need to call small banks and ask for their portfolio lender. Some will have floating terms and a few will lock it in for a while. I've never found a 30 year fixed.
Drive up and down 635 and/or Preston and call every bank you see. I know of 5.
@Chris C. - The issues you're finding around LLCs/Trusts are because you're talking to residential lenders about Fannie Mae loans. Fannie Mae and Freddie Mac make only residential loans. If you want to hold your property in an LLC or Trust, you must get a commercial loan. You can find commercial lenders if you call around and talk to some smaller/regional banks. Note that you will still be required to personally guarantee the loan, but it won't necessarily show up on your credit report.
Not sure your goal on this though - I've got an LLC and have done a couple of commercial loans, and honestly I still wonder why I bother.
Be careful about buying the property and financing it in your personal name, and then transferring it into the entity. This would trigger a due-on-sale clause requiring the whole loan amount to be repaid immediately on any transfer of title. They aren't often enforced, but it's something that I would stay away from as a matter of principal.
My goal is anonymity allowing me to control property but not own it (have my name on it). Apparently it's possible for the trust to be the registered manager on the LLC filing and the name on the deed instrument.
In a perfect world Apparently you can transfer property into a revocable trust and get around the due-on-sale clause due to the Garn–St. Germain Depository Institutions Act
You definitely need to Google the local REI's. That can be a good place to meet the RE professionals you're going to need later, as well as fellow investors. These are the people that have the answers to questions you don't even know you want to ask! There's also a couple of BP meetups in the metroplex, which you can find by digging around this site.
Best of luck and PM me if you need some help going in the right direction.
Welcome @Chris C. and best of luck on your endeavors.
Seems like your LLC question was addressed, and finding the "easiest" property will depend on a number of factors where connecting with local investors and attending meet-ups could help you zero in on what meets your criteria.
Getting into short-term vacation rentals has its pro's and con's and should come down to your goals and strategy in real estate. The most common one being that AirBNB/VRBO tends to be more of a hospitality approach that typical buy and hold. Do you have the time and/or team in place to facilitate quick (and frequent) turnovers? As both Eric(s)' mentioned these need to be in more desirable/touristy areas and therefore a favorable RTV will likely be harder to locate. The upside is that you could generate greater returns. One strong suggestion for AirBNB owners has been to buy them meeting criteria for a "typical" buy and hold so that if (ie, when) the market does have a downturn and travel takes a beating you can still have positive cashflow renting locally - which should be achievable being that you'll be in these desirable areas in the first place.
@Chris Viglietta non recourse lending is a term I just learned and things don't look that bad. I haven't done much searching for competition yet but these guys looked promising: http://www.texasinvestorloan.com/ with 30 year fixed, with my credit I may be able to get 5% and 20% down is very close to a fannie mae loan and if they will allow the home to be purchased under an LLC having a Trust be the manager of it and the name on the deed instrument that could be very intriguing. What are your thoughts? Feel free to message me directly.