Where To Borrow For LLC

Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes

A friend and I have started an LLC to begin real estate investing. We plan to flip houses to start and eventually branch out into different forms of real estate investments. We are approved for a HELOC of $100,000, but would like to use that money mainly for down payment and repairs if we decide to take it.

If not we could work out a down payment with cash, and finance the repairs through our day jobs. The problem is, we don't know where to go to finance the house under the LLC. We were hoping to get a much higher HELOC because of the amount equity in the home, but the debt to income ratio was just over the limit by a few percentage points.

The debt can be lowered and we could achieve a $230,000 HELOC, according to the mortgage broker. Should we attempt to lower the debt to income ratio, and get the HELOC increased to give us more wiggle room? Or stay at $100,000? And where should we look to get financing for the mortgage?

It is our intentions to only have the property for a short term, we don't plan on using the HELOC again, as long as we meet our goals. If all goes well when our money is liquid again we would roll it back into another investment. We are pretty much just looking to get ourselves in so we can learn through experience, and create a portfolio.

Any advice and knowledge would be very much appreciated, we are excited to get into the business!

If you’re not planning to hold the property, you could do a bridge/fix and flip. This could be used to finance the purchase alone, or the purchase and rehab. Definitely have an exit plan to replace the funds from the HELOC - sounds like yours would be to sell the property and pay the bridge off. As far as closing in an LLC, you can do this with a bridge or DSCR depending on whether you’re looking for a long term or short term financing solution. You mentioned working with a mortgage broker, have they not given you any options outside of the HELOC?

If you want to lower your DTI there’s no harm in that, but don’t over-leverage yourself. Just because the equity is there doesn’t mean you should use it all, especially if you’re a beginner. Utilization will be better on your credit if you use $50k of a $200k line vs a $100k line, just make sure you’re disciplined when it comes to using the funds and paying them back.

Feel free to connect if you have any questions and good luck!

[email protected]330-354-6590

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Robin SimonBusiness Member

Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes

2y

Quote from @Aidan Alexandre:

A friend and I have started an LLC to begin real estate investing. We plan to flip houses to start and eventually branch out into different forms of real estate investments. We are approved for a HELOC of $100,000, but would like to use that money mainly for down payment and repairs if we decide to take it.

If not we could work out a down payment with cash, and finance the repairs through our day jobs. The problem is, we don't know where to go to finance the house under the LLC. We were hoping to get a much higher HELOC because of the amount equity in the home, but the debt to income ratio was just over the limit by a few percentage points.

The debt can be lowered and we could achieve a $230,000 HELOC, according to the mortgage broker. Should we attempt to lower the debt to income ratio, and get the HELOC increased to give us more wiggle room? Or stay at $100,000? And where should we look to get financing for the mortgage?

It is our intentions to only have the property for a short term, we don't plan on using the HELOC again, as long as we meet our goals. If all goes well when our money is liquid again we would roll it back into another investment. We are pretty much just looking to get ourselves in so we can learn through experience, and create a portfolio.

Any advice and knowledge would be very much appreciated, we are excited to get into the business!

Have you looked at Hard Money Lenders - good directory right here on BiggerPockets if wanting to explore that option

[email protected]

Harpoon Capital515 Reviews

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Aidan Alexandre

OP

Member since 2024 · 3 posts · 3 votes

2y

Quote from @Brittany Minocchi:

Quote from @Aidan Alexandre:

A friend and I have started an LLC to begin real estate investing. We plan to flip houses to start and eventually branch out into different forms of real estate investments. We are approved for a HELOC of $100,000, but would like to use that money mainly for down payment and repairs if we decide to take it.

If not we could work out a down payment with cash, and finance the repairs through our day jobs. The problem is, we don't know where to go to finance the house under the LLC. We were hoping to get a much higher HELOC because of the amount equity in the home, but the debt to income ratio was just over the limit by a few percentage points.

The debt can be lowered and we could achieve a $230,000 HELOC, according to the mortgage broker. Should we attempt to lower the debt to income ratio, and get the HELOC increased to give us more wiggle room? Or stay at $100,000? And where should we look to get financing for the mortgage?

It is our intentions to only have the property for a short term, we don't plan on using the HELOC again, as long as we meet our goals. If all goes well when our money is liquid again we would roll it back into another investment. We are pretty much just looking to get ourselves in so we can learn through experience, and create a portfolio.

Any advice and knowledge would be very much appreciated, we are excited to get into the business!

If you’re not planning to hold the property, you could do a bridge/fix and flip. This could be used to finance the purchase alone, or the purchase and rehab. Definitely have an exit plan to replace the funds from the HELOC - sounds like yours would be to sell the property and pay the bridge off. As far as closing in an LLC, you can do this with a bridge or DSCR depending on whether you’re looking for a long term or short term financing solution. You mentioned working with a mortgage broker, have they not given you any options outside of the HELOC?

If you want to lower your DTI there’s no harm in that, but don’t over-leverage yourself. Just because the equity is there doesn’t mean you should use it all, especially if you’re a beginner. Utilization will be better on your credit if you use $50k of a $200k line vs a $100k line, just make sure you’re disciplined when it comes to using the funds and paying them back.

Feel free to connect if you have any questions and good luck!

Thank you for your input! I have emailed a few hard money lenders this morning and will do research into the DSCR loans. From what I am understanding you suggest to get a hard money loan and when the repairs are done and we are ready to close bridge it into a DSCR loan?

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Brittany MinocchiBusiness Member

Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes

2y

Quote from @Aidan Alexandre:

Quote from @Brittany Minocchi:

Quote from @Aidan Alexandre:

A friend and I have started an LLC to begin real estate investing. We plan to flip houses to start and eventually branch out into different forms of real estate investments. We are approved for a HELOC of $100,000, but would like to use that money mainly for down payment and repairs if we decide to take it.

If not we could work out a down payment with cash, and finance the repairs through our day jobs. The problem is, we don't know where to go to finance the house under the LLC. We were hoping to get a much higher HELOC because of the amount equity in the home, but the debt to income ratio was just over the limit by a few percentage points.

The debt can be lowered and we could achieve a $230,000 HELOC, according to the mortgage broker. Should we attempt to lower the debt to income ratio, and get the HELOC increased to give us more wiggle room? Or stay at $100,000? And where should we look to get financing for the mortgage?

It is our intentions to only have the property for a short term, we don't plan on using the HELOC again, as long as we meet our goals. If all goes well when our money is liquid again we would roll it back into another investment. We are pretty much just looking to get ourselves in so we can learn through experience, and create a portfolio.

Any advice and knowledge would be very much appreciated, we are excited to get into the business!

If you’re not planning to hold the property, you could do a bridge/fix and flip. This could be used to finance the purchase alone, or the purchase and rehab. Definitely have an exit plan to replace the funds from the HELOC - sounds like yours would be to sell the property and pay the bridge off. As far as closing in an LLC, you can do this with a bridge or DSCR depending on whether you’re looking for a long term or short term financing solution. You mentioned working with a mortgage broker, have they not given you any options outside of the HELOC?

If you want to lower your DTI there’s no harm in that, but don’t over-leverage yourself. Just because the equity is there doesn’t mean you should use it all, especially if you’re a beginner. Utilization will be better on your credit if you use $50k of a $200k line vs a $100k line, just make sure you’re disciplined when it comes to using the funds and paying them back.

Feel free to connect if you have any questions and good luck!

Thank you for your input! I have emailed a few hard money lenders this morning and will do research into the DSCR loans. From what I am understanding you suggest to get a hard money loan and when the repairs are done and we are ready to close bridge it into a DSCR loan?

Yep, you'd start with a bridge loan and refinance into the DSCR before the balloon on the bridge is due (assuming you want to hold the property, you could also sell it if your goal was to flip...just need to make sure it's before the balloon is due on the bridge either way).

[email protected]330-354-6590

Brittany Minocchi - Barrett Financial Group, LLC520 Reviews

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Where To Borrow For LLC

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