Partnership/lending help in East Texas

3 Replies

Hey guys, I am a new investor in the East Texas area, currently located in Tyler, Tx. I am eager to purchase my first property however I currently own a business, which I have now owned for a little over a year now. Of course, getting approved for a loan has been a nightmare without two full years of tax return from the business. I would love to partner with someone or talk with someone who could give advice on how to get financing or other options?? 

Thanks! 

Outside of your main business, your only job is to develop a plan for investing and build relationships in the investing community. With the right relationships, you will have most everything you need to succeed. Attend virtual or in-person REI meetups when possible. Join online REI groups so you can find active and seasoned investors in your area whom you can ask questions of occasionally. There are a number of these groups on social media platforms. Spend at least 1 to 2 hours per day (evening or late night) reading investing content online and make learning a priority. Finally, understand that there are more actors in this industry than in Hollywood, so believe none of what you hear and only half of what you see. Due diligence is critical. Don't take advice from others who aren't currently buying and selling real estate using multiple entry/exit strategies.

We had a similar issue when starting up our real estate LLC. Most lenders want to see two years of tax returns and a credit history. The first couple loans can be tough. To establish a credit history I got several credit cards in the company name and used them to buy renovation supplies. Pay off the card at the end of the month to avoid interest. Here are a couple loan options you might consider.

1) Assuming you are the sole owner of the LLC you can get a conventional FannieMae loan in your personal name and transfer the property ownership into the LLC's name. You will need to wait until the loan is sold/settled, then you'll need to get permission from the loan owner to transfer deed without triggering due on sale clause. I took me just under a year to accomplish. Wells Fargo was a total PIA to work with fighting me every step of the way. Don't be discouraged if they say it is "impossible".

2) Look at investor cashflow loans from private money lenders.  Private Money look at the financials for the property and if you can show a positive cashflow after financing you can be qualified for a loan.  The downside is private money is very expensive compared to conventional financing.  You will have to pay upfront points, higher interest rates, and pre-payment penalties.  Many of these guys stopped underwriting loans during Covid. Good way to get your feet wet and start establishing credit.  

3) Look for portfolio lenders.  Target small to medium sized regional banks and credit unions.  Stay away from the big guys like BoA and WF.  I called 20 local banks/credit unions and was able to find two that were willing to do commercial loans.  Rates are competitive with conventional lenders but you need to do a lot of leg work.  Texas Commerce Bank is the one I went with.  VeraBank was the other willing to lend.

Having done all three types of loans I'm currently focusing on portfolio lenders. Once you find someone willing to lend in your market they are the easiest to work with. Frequently you are talking directly with the underwriting agent with greater flexibility when working with small business. I was able to qualify with 1 year tax return, business balance sheet and solid credit scores.

Pete

I don't know how many banks you have talked with but I would encourage you to keep talking to as many lenders as you can. Most will give you the same answer but you might be able to run into a small community banks that might have some different loan products to offer.

You could also try to partner with an investor or someone else who has access to financing and do some type of equity split. I am still learning more about this as well but essentially you find someone to bring the loan and down payment and then you split the cash flow. You use your half of the cashflow to pay back to your partner until your half of the down payment is paid off. I have no experience with this type of transaction but I think it has potential. Check out this forum post, it gives a good run down of how to structure these deals:

https://www.biggerpockets.com/topics/879011

You can always go the creative route and pursue owner finance opportunities but you have to know how to approach these conversations from the right angle and structure the deals. This can allow you to access the bank and get into deals for less money than a bank would require with a down payment. 

Feel free to reach out. Happy to help anyway I can!

-BA