Real Estate Consultant 路 Mexico 路 Member since 2019 路 5 posts 路 0 votes
Hi BP members! I'm from Mexico and I've been studying recently about multifamily investment in the US, I'm planning to raise a friends and family fund in the next year and I would like to know if it is possible to get a loan for a commercial multifamily project creating an LLC or what would be the best way to do it.
London 路 Member since 2019 路 722 posts 路 386 votes
7y
Pedro,
1. Check the laws in your country. I sort of doubt Mexico is much of an issue. Some other countries do have restrictions. Check the facts.
2. You need to understand the tax regulations on both sides of the boarder. While standard advice for USA investors is to create and use an LLC, it could be a very bad idea. A pass through tax vehicle like an LLC could create issues in the USA or in Mexico. It comes down to how one country will tax the income and then how the home country deals with it. Some deductions allowed by the USA will not be allowed by another country. So, you need to figure out how the two tax regimes line up before knowing the optimal set up or entity to use.
3. The lending advice is a bit off. Individuals borrowing in their own name will need a credit file in the USA. You would like need a USA income and address. If you were buying a major commercial property, the lender looks a lot less, if at all, at the personal credit of the person who owns the company. It is more about the income stream from the asset. So, there will be some strategies closed to you unless you are a cash buyer. And there will be some strategies which are open to you even though you are not really showing up is the USA credit bureaus.
You also can look at seller financing for some of all of what you need. If an institutional lender is happy at 50% LTV to a foreign national and the seller will supply another chunk of the debt (for example, 30% 2nd), you might end up in a fine situation for financing.
4. You will need to deal with AML (anti-money laundering) and other verifications. The lenders want to know who you are, where the money came from, etc. Standard practice these days in all advanced countries. Depending on your background, there could be other questions. Having a family member who is an elected official can subject you to extra AML checks. If you were from a specific country that is on a watch list, then expect more of the same.
I invest in the USA and UK. I have lived some of the issues you will bump into. You can crack the code if you want to put in the effort. Good luck. Stay in touch.
Developer 路 Charlottesville, VA 路 Member since 2018 路 4k+ posts 路 4k+ votes
7y
@Pedro Adolfo Garcia first thing is to check with your country regarding rules and tax laws for investing outside the country.
Next step would be to set up an LLC in the US then get your EIN and set up a bank account, preferably with one who will grant a loan to foreign corporations or investors. Some banks will not lend to foreign companies or investors.
Palo Alto, CA 路 Member since 2017 路 230 posts 路 200 votes
7y
Most banks would not lend to non US residents or people with limited tie in the US. Even for US Citizens, many US banks won't do loans with investors from out of the state (they want local tie).
Investor 路 Houston, TX 路 Member since 2010 路 234 posts 路 145 votes
7y
@Pedro Adolfo Garcia you will not get any loan from banks and your LLC will not get any loans for first 2 years as well. Instead you can do the following :
1) Invest passively with existing Syndication and/or
2) Be a syndicator and find a Sponsor for Loan docs.
Real Estate Consultant 路 Mexico 路 Member since 2019 路 5 posts 路 0 votes
7y
@Edward Liu and @Shahriar Khan thanks a lot for your comments, I really appreciate them. With this info I'll do a little more research to make a 2-3 year plan to be able to invest on multifamily.
London 路 Member since 2019 路 722 posts 路 386 votes
7y
Pedro,
1. Check the laws in your country. I sort of doubt Mexico is much of an issue. Some other countries do have restrictions. Check the facts.
2. You need to understand the tax regulations on both sides of the boarder. While standard advice for USA investors is to create and use an LLC, it could be a very bad idea. A pass through tax vehicle like an LLC could create issues in the USA or in Mexico. It comes down to how one country will tax the income and then how the home country deals with it. Some deductions allowed by the USA will not be allowed by another country. So, you need to figure out how the two tax regimes line up before knowing the optimal set up or entity to use.
3. The lending advice is a bit off. Individuals borrowing in their own name will need a credit file in the USA. You would like need a USA income and address. If you were buying a major commercial property, the lender looks a lot less, if at all, at the personal credit of the person who owns the company. It is more about the income stream from the asset. So, there will be some strategies closed to you unless you are a cash buyer. And there will be some strategies which are open to you even though you are not really showing up is the USA credit bureaus.
You also can look at seller financing for some of all of what you need. If an institutional lender is happy at 50% LTV to a foreign national and the seller will supply another chunk of the debt (for example, 30% 2nd), you might end up in a fine situation for financing.
4. You will need to deal with AML (anti-money laundering) and other verifications. The lenders want to know who you are, where the money came from, etc. Standard practice these days in all advanced countries. Depending on your background, there could be other questions. Having a family member who is an elected official can subject you to extra AML checks. If you were from a specific country that is on a watch list, then expect more of the same.
I invest in the USA and UK. I have lived some of the issues you will bump into. You can crack the code if you want to put in the effort. Good luck. Stay in touch.
Real Estate Syndicator 路 Milwaukee, WI 路 Member since 2018 路 1k+ posts 路 907 votes
7y
I would recommend reaching out to a mortgage broker that has a reputation of working with foreign investors. They may have connections/insight as to how you can get it done.
@Pedro Adolfo Garcia you will not get any loan from banks and your LLC will not get any loans for first 2 years as well. Instead you can do the following :
1) Invest passively with existing Syndication and/or
2) Be a syndicator and find a Sponsor for Loan docs.
Wish you the best ..
@Shahriar Khan do you know any source where I can read about trusted Syndication in Houston?
Real Estate Agent 路 Dallas 路 Member since 2021 路 3 posts 路 0 votes
2y
Im mexican, I have been working with some International Investors. The reply from John is pretty accurate. I just would add you may like to elect to be taxed as a corporation if you decided to form an LLC because otherwise will carry tax consecuences in Mexico. That being said, you may also have to form LLC in every state you invest in because you need to pay state and local taxes there. My clients have formed a Wyoming llc as a holding and then LLCs for each property they purchase. For the part of the loan, many banks are reluctant to approve non recourse loans for small loans, that means someone in the US with SSN has to sign as guarantor, furthermore, you will not qualify for most agency loans, like Fannie, Freddie, FHA, SBA, etc. So your options are limited to portfolio loans an CMBS. The good news is the bigger the loan, the more more open the banks to lend you a non recourse loan, that means you dont need a guarantor in the US, they will underwrite based only on the property cashflow.