Package Triplex and SFH First Deal with LLC or Personal Loans

Starting Out
5yFollow

Package Triplex and SFH First Deal with LLC or Personal Loans

Tyler Kneer
New to Real Estate · Evansville, IN · Member since 2020 · 7 posts · 7 votes

Hey All!

My partner and I are looking to buy our first property(s) and we have our eyes set on a package deal. This package includes a triplex and one SFH. Their current listing price is $115,000 each or $230,000 total and "must be sold together" though I believe this price can be negotiated lower.

The listing states that these properties have the ability to be turned into a fourplex (Adding a unit to the existing triplex) and a triplex (SFH).

As this is our first deal and we, unfortunately, do not have $230k sitting around we will need to acquire a loan.

We have set up an LLC as a 50/50 ownership with a business partner. We are both young (21/22) and have credit scores of 740+ each.

We have never acquired a mortgage loan before and are inexperienced in the subject.

1. Should we use the LLC to purchase the property?

2. If so because it's through the LLC does this change our loan options?

3. Do we not use the LLC on the first deal and use individual loans like an FHA?

4. How can we purchase this property for a lower down payment than 20%? Does the property producing cashflow help us?

5. Would taking the BiggerPockets calculator numbers with me to the bank help us with down payment and interest?

All advice is welcome! Thanks!

1Reply
18 views

1 Reply

Jump to latestLatest
  • Blaine Alger
    Investor · Waco TX / Conroe, TX · Member since 2017 · 376 posts · 228 votes
    5y

    Tyler, congrats on finding your first potential deal. 

    To answer your questions:

    1-4. 

    Buying the property in your LLC would be ideal but it can be difficult to do that sometimes because when you use your LLC to buy the property/get the loan, the bank is no longer looking at your credit, they are looking at the credit of the business/LLC. I would guess since yall just set up the LLC then your business has no existing credit. There might be ways you can get around this but you have to go talk to the bank and see. I'm guessing if you signed a personal guarantee on the debt then they might let you get around it. Also with an LLC you will be looking at more commercial loan terms which will be less favorable than personal rates. You would be seeing terms that would be 15-20 yrs and rates that are between 4%-5%. This will make your payment higher and reduce cash flow.

    I would recommend to just get the loan in your own name for the advantage of better terms. You could even choose to live in one of the units and get in to the deal for a lower down payment (3.5%-5%). You might be able to get in for less than 20% but you will have to shop around at some local credit unions/community banks but you will have to carry PMI (private mortgage insurance) regardless. I'm not sure how much you have shopped around but some banks will require 25% down for an investment property.

    5.

    It would definitely help to bring your banker the PDF from the BP calculators. You have to remember that it is just a person you are talking to and they might be able to be persuaded by you presenting them the numbers in an organized and professional manner. However ,at the same time, they do have a bottom line and they won't pass it no matter how pretty your spreadsheet looks. But it never hurts to give it a try and ask. 

    Hope this helps.

    -Ba

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free