Help finding loans to put on real estate investments
Member since 2021 · 12 posts · 1 vote
Help finding loans to put on real estate investments
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Chicago · Member since 2018 · 214 posts · 165 votes
4yQuote from @Chad Westfall:
Quote from @Tom O.:
Quote from @Chad Westfall:
Not sure I agree with this for all situations. I buy multifamily (5+ unit) properties. The LLC is required to start any type of financial conversations.
@Christopher Tokarski
I think too many people are told "get an LLC" and they blindly do it not knowing why. What is the purpose of the LLC? Is it liability protection? A $1 million unbrella costs $300. Is it something else? What?
@Tom O. In my experience, many commercial lenders won't do personal loans on commercial properties. They require an entities (LLC, S or C Corp, etc). Your a perfect example of an exception, which is why I said I don't know if I totally agree with that statement. There are exceptions in every case.
I did misspeak that all loans require an entity. I used LLC as an example but should have kept it more broad.
As far as the LLC conversation, there are tax strategies that make LLC's favorable. They are not just for protection, although that is the most common reason people use them.
2. What tax strategy is there that makes an LLC favorable? I would love to know since my accountant has said nothing of the sort and my own understanding is that an LLC is just a pass through for an individual. So it is hard for me to see what tax benefit there could be but I'm not an accountant. I do like and trust my accountant.
13 Replies
- 4yRaymond J. RodriguesBusiness MemberLender · Miami, FL · Member since 2017 · 1k+ posts · 797 votes
Hi Chris, prior to your one year of earnings, what did you do? Were you in school or had a different job?
Helm Mortgage Corp.5125 Reviews - Member since 2021 · 12 posts · 1 vote4y
Hello,
I was remodeling homes for an old boss who was working for some investors himself. And, a Team Leader for a manufacturing plant for 5 years.
Thanks for replying,
Chris
- Lender · Annapolis, MD · Member since 2022 · 154 posts · 70 votes4y
@Christopher Tokarski if you are going to be investing and this being your first, you want have the best of terms because those projects were none of your own. If you are going to start investing and using hard money, I would first get your LLC set up. Definitely make sure you can get approved before going through the trouble first.
- Chicago · Member since 2018 · 214 posts · 165 votes4y
Don't waste money setting up an LLC until you actually own something.
I'm not sure what your question is. Do you have a decent credit score? Do you have the 20-25% down payment for investment property? Do you have a current home with equity?
To buy an investment property you need 20-25% down. If you move into the property you could get a down payment as low as 3.5-5% down. In some areas in northwest indiana you may qualify for a no money down USDA loan. If you're a veteran you would qualify for a VA no money down loan. If you already have a house you may want to move into your rental just for that low down payment. You only need to live there one year.
I've seen this move into a rental for one year for the low downpayment approach called NOMAD and there's a NOMAD podcast. I would read Lindahl's book "multi-family millions."
- Investor · Pensacola · Member since 2021 · 9 posts · 6 votes4y
Not sure I agree with this for all situations. I buy multifamily (5+ unit) properties. The LLC is required to start any type of financial conversations.
A lot more info is need to really give you good advice. I get you are trying to figure out the financing portion of the equation. But as others have mentioned, what type of credit do you have, what type of property are you looking for, what is your strategy, etc are all key data points that are needed to give you sound advice.
Otherwise you end up with people telling you this or that based on their experience and their focus. If that differs from your goals, then it becomes bad advice. If your goals are similar, then its probably good advice. But without knowing, its hard to tell.
- Chicago · Member since 2018 · 214 posts · 165 votes4yWhy is an LLC required to start "any type of financial conversations"? I'm at 25 units with two buildings at 5+ units and I still don't have an LLC. Is my commercial banker doing it wrong? You think I need an LLC to have a "conversation" with someone who wants to loan me money or sell me a building?
Quote from @Chad Westfall:
Not sure I agree with this for all situations. I buy multifamily (5+ unit) properties. The LLC is required to start any type of financial conversations.
@Christopher Tokarski
I think too many people are told "get an LLC" and they blindly do it not knowing why. What is the purpose of the LLC? Is it liability protection? A $1 million unbrella costs $300. Is it something else? What? - Chicago · Member since 2018 · 214 posts · 165 votes4y
To answer your question, talk to bankers now. I have really liked Horizon bank for loans. Talk to bankers and mortgage brokers now about what your income and data would pre-qualify you for as some sellers will want to see that before they even show you their property. You should also try your own bank. You already have a relationship with them.
- Investor · Pensacola · Member since 2021 · 9 posts · 6 votes4y
Quote from @Tom O.:
Why is an LLC required to start "any type of financial conversations"? I'm at 25 units with two buildings at 5+ units and I still don't have an LLC. Is my commercial banker doing it wrong? You think I need an LLC to have a "conversation" with someone who wants to loan me money or sell me a building?Quote from @Chad Westfall:
Not sure I agree with this for all situations. I buy multifamily (5+ unit) properties. The LLC is required to start any type of financial conversations.
@Christopher Tokarski
I think too many people are told "get an LLC" and they blindly do it not knowing why. What is the purpose of the LLC? Is it liability protection? A $1 million unbrella costs $300. Is it something else? What?@Tom O. In my experience, many commercial lenders won't do personal loans on commercial properties. They require an entities (LLC, S or C Corp, etc). Your a perfect example of an exception, which is why I said I don't know if I totally agree with that statement. There are exceptions in every case.
I did misspeak that all loans require an entity. I used LLC as an example but should have kept it more broad.
As far as the LLC conversation, there are tax strategies that make LLC's favorable. They are not just for protection, although that is the most common reason people use them.
- Chicago · Member since 2018 · 214 posts · 165 votes4y1. My commercial lender has given me two loans without an LLC.
Quote from @Chad Westfall:
Quote from @Tom O.:
Why is an LLC required to start "any type of financial conversations"? I'm at 25 units with two buildings at 5+ units and I still don't have an LLC. Is my commercial banker doing it wrong? You think I need an LLC to have a "conversation" with someone who wants to loan me money or sell me a building?Quote from @Chad Westfall:
Not sure I agree with this for all situations. I buy multifamily (5+ unit) properties. The LLC is required to start any type of financial conversations.
@Christopher Tokarski
I think too many people are told "get an LLC" and they blindly do it not knowing why. What is the purpose of the LLC? Is it liability protection? A $1 million unbrella costs $300. Is it something else? What?@Tom O. In my experience, many commercial lenders won't do personal loans on commercial properties. They require an entities (LLC, S or C Corp, etc). Your a perfect example of an exception, which is why I said I don't know if I totally agree with that statement. There are exceptions in every case.
I did misspeak that all loans require an entity. I used LLC as an example but should have kept it more broad.
As far as the LLC conversation, there are tax strategies that make LLC's favorable. They are not just for protection, although that is the most common reason people use them.
2. What tax strategy is there that makes an LLC favorable? I would love to know since my accountant has said nothing of the sort and my own understanding is that an LLC is just a pass through for an individual. So it is hard for me to see what tax benefit there could be but I'm not an accountant. I do like and trust my accountant. - Banker · Huntington Beach, CA · Member since 2018 · 99 posts · 100 votes4y
@Christopher Tokarski Luckily for you, conventional borrowing is slowing down so lenders now have time to talk about complicated loans. DM me if you still don't have an answer. I can refer you to a few brokers to chat with about financing. Depending on the property type, if you have 20% to put down, and some extra for closing costs you can use a DSCR (Basically means qualify without your income but the rents or projected rents from the property) It's higher interest than conventional, lower than hard money but a great place to start.
- Lender · Phoenix, AZ · Member since 2020 · 19 posts · 0 votes4y
@Christopher Tokarski You can put down 20% on conventional but I put way more investors into DSCR loans nowadays since I can get them 20% down in DSCR too and its easier. We dont qualify based on the borrowers income history at all. Its much more about qualifying the property of interest than looking at the borrowers background.
- Chicago · Member since 2018 · 214 posts · 165 votes4y
Quote from @Andrew Goldman:
@Christopher Tokarski You can put down 20% on conventional but I put way more investors into DSCR loans nowadays since I can get them 20% down in DSCR too and its easier. We dont qualify based on the borrowers income history at all. Its much more about qualifying the property of interest than looking at the borrowers background.
What is a DSCR loan?
- Member since 2021 · 12 posts · 1 vote4y
@andrewThank you, I will look into that type of loan
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