Updated 3 days ago on .
Understanding Guidelines concerning Operating Agreements
The vast majority of real estate investors I have worked with over the years have done all their business in one or more LLCs. The vast majority have also had credit score issues from time to time, especially when they are really active all the time. Many times, even with a lower score, it will meet private lending guidelines provided there are not a lot of derogatory marks (none is always preferred). However, sometimes it can drop low enough that it becomes a problem - even with lenders you have a long history with. FICO scores are also significantly more important for DSCR loans.
If you are a single member llc, you're going to need to find another person. If you are a multi-member llc, the underwriting team typically, but not always, will underwrite the loan to the lowest score of any member depending on ownership percentages. The ownership percentage is the key here. Every lender is going to be a little different, but I think a good thumb rule is that anyone with 19% or less ownership won't have their credit or experience evaluated. This won't affect your experience requirement, as the experience is technically with the entity and not the guarantor.
I have heard that traditional and non-qm lenders will sometimes require seasoning on any operating agreement to negate any short term changes like this. I do not know if that is true, but in my experience with truly private lending, the credit team won't care. Add members, adjust ownership percentages and close the loan. If you amend it back down the line that's fine, just understand that whoever signed those documents is still on the hook if things go bad.
This is another great reason you need to have a broker or loan officer who really takes the time to get to know you and your project well. They also need to know their guidelines very well, so any potential risks to your approval are handled up front, saving you time and needless stress.