I’m a newbie investor trying to purchase my first multi-unit investment property here in Houston, Texas. It’s a new construction 4-PLEX with 2bed/1ba units...
Purchase price is 300K and I’ll be putting a 25% down payment...
I will be using my Qualified Retirement Plan and would need to find a lender who does non-recourse loans with 70-75% LTV refinancing.
My FICO score is currently an 824. Can anybody advise me on any possible lenders?
Most non-recourse lender will require 30-40% down plus 10-15% reserves. Over the years I compiled a list of lenders for my clients offering such financing for retirement accounts, check it out, see of one of them can accommodate your needs:
Your credit score would not be of much significance here, since the loan is non-recourse - you personally would not be responsible for the repayment, the underlying asset would be the only security. Therefore the lender will look at the property value and income it produces to determine if they will lend you.
If you want to use IRA funds most cap LTV at 50-60% that i have used and seen. FYI they take forever to close so make sure your seller is in the loop. 60-90 days or more.
@RJ King No lending institute (Bank/Credit Union/Hard Money etc) would have loan product for 300K or less with non recourse option... May be possible with atypical hard money /private lender with 40-50% down and higher (probably double) interest rate compare to market....
@RJ King the only way you can get non - recourse financing the loan balance amount has to be at least $1M. Fannie Mae and Freddie Mac have non-recourse loan products
Most non-recourse lender will require 30-40% down plus 10-15% reserves. Over the years I compiled a list of lenders for my clients offering such financing for retirement accounts, check it out, see of one of them can accommodate your needs:
Your credit score would not be of much significance here, since the loan is non-recourse - you personally would not be responsible for the repayment, the underlying asset would be the only security. Therefore the lender will look at the property value and income it produces to determine if they will lend you.
If you want to use IRA funds most cap LTV at 50-60% that i have used and seen. FYI they take forever to close so make sure your seller is in the loop. 60-90 days or more.
Tim, do you have experience dealing with all non-recourse lenders out there? Probably not. Therefore you should refrain from making such general statements. Instead you should talk about your experience with the specific lender you worked with, giving their name... That would be much more helpful. I know that your statement is inaccurate because I personally worked with one of the lenders specializing in non-recourse loans to retirement accounts and my experience was pleasant. The time it took to close was around 30 days.
@RJ King No lending institute (Bank/Credit Union/Hard Money etc) would have loan product for 300K or less with non recourse option... May be possible with atypical hard money /private lender with 40-50% down and higher (probably double) interest rate compare to market....
There are several lenders who specialize in non-recourse loans to retirement accounts and have much lower minimum loan amount, at least one of them does not have minimum loan balance. Check out the link I provided above.
@RJ King the only way you can get non - recourse financing the loan balance amount has to be at least $1M. Fannie Mae and Freddie Mac have non-recourse loan products
Again inaccurate info. See the list of lenders I provided in the link above.
I have personally originated 3 ira loans with lenders on your list and they all took 60-90 days. The main reason being all the clients didn’t have accounts setup correctly. After they where setup correctly they all closed in less than 30 days. So if your thinking of using this product I would contact one of the lenders on the list ahead of time to get your paperwork in order. Also when making an offer get with the lender so you have the right name on the purchase contract. This was also a headache on one of my deals.
First federal does an amazing job and I highly recommend roger. He will get it handled and closed the quickest.
@Dmitriy Fomichenko agree with you about some specialized lenders lending non recourse loan (as i said at second half of my comments ) with a lot of down payment and higher rate (all about risk adjusted at the end , pay now or guarantee it) ... example : a good commercial rate as of last Friday (Oct/11th ) would be 4.5% APR/25/long term fixed/1% Origination /1 yr IO/20% DP ... highly doubt that those non recourse lender will match a loan similar to that ...
I have been wrong before and i would be dancing and signing if i am wrong in this case ..
PS: It's a great list ..thanks for sharing.... I plan to call some of them next week to test the water as well..
Comparing commercial non-recourse loan with non-recourse loan to an IRA/401k is like comparing lemons and oranges. Yes, both are citrus plans, but are not the same fruits. Unfortunately when it comes to getting a loan on a purchase in an IRA/401k there aren't very many choices, but some of the lenders on my list have pretty decent terms, much much better than hard money. I got a loan with NASB about 5 years ago on a property in AZ under 5%, 60% LTV.
@Dmitriy Fomichenko great analogy .. :) ... agree on loan type and available products for non recourse loans... on that note..it would be interesting to see how that would work for refinancing on a portfolio with equity for 10+ properties ...
If you want to use IRA funds most cap LTV at 50-60% that i have used and seen. FYI they take forever to close so make sure your seller is in the loop. 60-90 days or more.
Tim, do you have experience dealing with all non-recourse lenders out there? Probably not. Therefore you should refrain from making such general statements. Instead you should talk about your experience with the specific lender you worked with, giving their name... That would be much more helpful. I know that your statement is inaccurate because I personally worked with one of the lenders specializing in non-recourse loans to retirement accounts and my experience was pleasant. The time it took to close was around 30 days.
Dude, I hate being negative here, and was going to skip passed your comments, but the fact you called this guy out is comical. Your post is full of wrong info.
Having done SEVERAL loans -- local bank (recourse) and agency (non recourse) -- including a $30m large refi, you're wrong. They do still care about you as a borrower even if it's non recourse. My LTV was 75%, but it could have been 80%. So not in the 60s. There was no reserve requirement though they do escrow for property taxes (lame) and in some cases insurance (super lame). It's not a 30 day deal (local banks can be). It was more like 60 days with an act of god to get them down to ~45.
@RJ King the only way you can get non - recourse financing the loan balance amount has to be at least $1M. Fannie Mae and Freddie Mac have non-recourse loan products
Again inaccurate info. See the list of lenders I provided in the link above.
He's thinking about the Freddie small balance for 5+ commercial stuff. It is ~$1m minimum (they'll go lower sometimes) and it's non recourse. However that won't work for someone looking to do a 4 unit deal.
@Dmitriy Fomichenko agree with you about some specialized lenders lending non recourse loan (as i said at second half of my comments ) with a lot of down payment and higher rate (all about risk adjusted at the end , pay now or guarantee it) ... example : a good commercial rate as of last Friday (Oct/11th ) would be 4.5% APR/25/long term fixed/1% Origination /1 yr IO/20% DP ... highly doubt that those non recourse lender will match a loan similar to that ...
I have been wrong before and i would be dancing and signing if i am wrong in this case ..
a good commercial rate as of last Friday (Oct/11th ) would be 4.5% APR/25/long term fixed/1% Origination /1 yr IO/20% DP .
less than 2 weeks ago I got a 10 year fixed loan at 4.1%. non recourse. 30 year am. 0% origination (and no broker fee). 75% LTV. Only negative is I hate escrows but that's more of an accounting PAIT and it makes me feel like they're treating me like a child. And it has prepayment penalty (step down) which my recourse bank loans almost never have (though I can pay off up to 20% of the UPB each year w/o penalty)
Having done SEVERAL loans -- local bank (recourse) and agency (non recourse) -- including a $30m large refi, you're wrong. They do still care about you as a borrower even if it's non recourse. My LTV was 75%, but it could have been 80%. So not in the 60s. There was no reserve requirement though they do escrow for property taxes (lame) and in some cases insurance (super lame). It's not a 30 day deal (local banks can be). It was more like 60 days with an act of god to get them down to ~45.
Cody, can you confirm the following: in these examples did you buy those properties in your IRA or were they personal investments?
You were quick to correct me, but would not respond with clarification...
It would be helpful for you and others who commented here to read the original poster. Understanding the context is important. While the title of this post might be unclear, he makes it very clear in his description that he not just looking for a non-recourse loan, he is looking for a non-recourse loan to his retirement account. And as I said earlier comparing the two is just like comparing lemons and oranges, they are similar but not the same.
I know that you are successful multifamily investor and have experience with financing those property using non-recourse loans, dealing with local banks, agency, Freddy and Fannie, etc. and could get 80% financing with no reserves requirements. And that's great, you know a lot more about multifamily financing than me and I'm not going to pretend to be an expert in this area. But that is not what I was talking about and probably none of those lenders could help @RJ King get financing on the 4-plex he is buying inside of his retirement account for $300K. For that he need specific lenders with specific programs, and that is what I was referring to. And some of the lenders from the list I provided can finance this deal for him.
Depends on the lender. I know for a fact that all of them will lend to an IRA/401K, and perhaps some will lend to an LLC, I don't know, you'd have to contact each lender directly to find out.
You were quick to correct me, but would not respond with clarification...
It would be helpful for you and others who commented here to read the original poster. Understanding the context is important. While the title of this post might be unclear, he makes it very clear in his description that he not just looking for a non-recourse loan, he is looking for a non-recourse loan to his retirement account. And as I said earlier comparing the two is just like comparing lemons and oranges, they are similar but not the same.
I know that you are successful multifamily investor and have experience with financing those property using non-recourse loans, dealing with local banks, agency, Freddy and Fannie, etc. and could get 80% financing with no reserves requirements. And that's great, you know a lot more about multifamily financing than me and I'm not going to pretend to be an expert in this area. But that is not what I was talking about and probably none of those lenders could help @RJ King get financing on the 4-plex he is buying inside of his retirement account for $300K. For that he need specific lenders with specific programs, and that is what I was referring to. And some of the lenders from the list I provided can finance this deal for him.
Fair enough. I was quick to reply because I was on BP when I saw your post. But I'm not on here daily so I'm just seeing both of your @'s. Yeah, the only time I ever bought with a 401k, I pulled my $ out to buy a deal, quickly sold another deal in order to pay back my 401k withdraw before I was penalized. But honestly if I ever needed the $ again I'd just pull out my 401k money, take the penalty hit, and invest on my own (though since I'm no longer employed, and haven't been for 10 years, my 401k is not growing. In fact, it's the 100% the same balance as it was 10 years ago.
If the balance in your 401k is the same as it was 10 years ago - you lost money to inflation, this amount does not have the same purchasing power as it had 10 years ago. In this case I would make sense to take early distribution, pay taxes and penalties and invest into what you know, understand and can control.
An alternative to this (if you are willing to do little bit of work) is to move this old 401k into self-directed IRA and invest in alternative assets. One of the best investments for SD IRA in my opinion is private lending for the following reasons:
- low risk, your investment is protected by a collateral (real property) at low LTV
- it is completely passive, I get monthly payment direct deposited into my bank account
- you get decent returns (I average over 10%)
Of course there are number of other ways to invest and this might not be for everyone, but it is a great way to diversify and invest in tax-deferred or tax-free (in case of a Roth) environment.
If the balance in your 401k is the same as it was 10 years ago - you lost money to inflation, this amount does not have the same purchasing power as it had 10 years ago. In this case I would make sense to take early distribution, pay taxes and penalties and invest into what you know, understand and can control.
An alternative to this (if you are willing to do little bit of work) is to move this old 401k into self-directed IRA and invest in alternative assets. One of the best investments for SD IRA in my opinion is private lending for the following reasons:
- low risk, your investment is protected by a collateral (real property) at low LTV
- it is completely passive, I get monthly payment direct deposited into my bank account
- you get decent returns (I average over 10%)
Of course there are number of other ways to invest and this might not be for everyone, but it is a great way to diversify and invest in tax-deferred or tax-free (in case of a Roth) environment.
Yeah, I know it's gone down in value. It's not really a significant enough amount for me to even mess with so it sits there rotting. I don't want to invest it and deal with all the restrictions so if I do anything with it I'll pay the feel just to get control over my own $ and add it to my investable pile I used to buy multifamily.