Best Way to Pull Money From These Properties

General Real Estate Investing
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Best Way to Pull Money From These Properties

Sam Brock
Member since 2018 · 4 posts · 1 vote

I'm a contractor and currently building two houses on two lots that I own outright. The goal is to keep these for rentals.

I currently own the land personally and am funding the builds with a combination of HELOC and cash - no bank debt tied to these properties specifically. Once completed, the goal is to get them rented and then pull money out of each house to build a high performance spec. My property holding LLC would ideally own the land/houses and manage the rentals once completed.

When they are complete, I will have about $375K in each build and they should appraise around $675k each. My goal is to get back my $750k, pay off the high interest HELOC, and get another $200k or so out of them. Appraised value of $1.35m and looking to finance $950k.

Questions:

1. How does the transaction work between me personally and my holding company LLC? Unw do lenders view this?

2. What type of loan products would be available for an LLC buying a house? Can you do DSCR? All-In-One mortgage? Traditional mortgage?

3. How would you attack this deal?

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  • John Clark
    Member since 2018 · 1k+ posts · 1k+ votes
    1y
    Quote from @Sam Brock:

    I'm a contractor and currently building two houses on two lots that I own outright. The goal is to keep these for rentals.

    I currently own the land personally and am funding the builds with a combination of HELOC and cash - no bank debt tied to these properties specifically. Once completed, the goal is to get them rented and then pull money out of each house to build a high performance spec. My property holding LLC would ideally own the land/houses and manage the rentals once completed.

    When they are complete, I will have about $375K in each build and they should appraise around $675k each. My goal is to get back my $750k, pay off the high interest HELOC, and get another $200k or so out of them. Appraised value of $1.35m and looking to finance $950k.

    Questions:

    1. How does the transaction work between me personally and my holding company LLC? Unw do lenders view this?

    2. What type of loan products would be available for an LLC buying a house? Can you do DSCR? All-In-One mortgage? Traditional mortgage?

    3. How would you attack this deal?

    Keep in mind that you will probably be required to sign a personal guarantee of the loans. You don’t have a large enough portfolio of houses for a lender to feel comfortable without a personal guarantee. Also, are you doing separate loans, or one loan covering both properties? Finally, of the extra $200k, how much are you putting into operating reserves?
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  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    1y

    Hey Sam - 

    1. Your credit, investment history and bank statements will likely be evaluated and you'll need to personally guarantee the loan, but you can close under your LLC. The debt may not report to your personal credit (unless you are late on or miss payments, then all bets are off)

    2. DSCR is available for an LLC to use for purchase and cash out refis as long as you never plan to occupy the property yourself. Fannie/Freddie won't allow you to close conventional financing under an LLC.

    3. Are you looking to finance both with one loan, or separately? Both on one loan may save you a bit up front in costs, but it'll make it more complicated if you ever decide to keep one and sell one. I'd recommend keeping them separate for that reason. 70% LTV should be doable as long as you qualify (LTV can be affected by your FICO scores). Your loan costs will come out of those proceeds, so you may want to bump it up slightly higher unless you want to cover those costs out of pocket at closing.

    Happy to answer any other questions if you'd like to connect! 

    [email protected]330-354-6590
    Brittany Minocchi - Barrett Financial Group, LLC522 Reviews
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  • Magnus Wikström
    Member since 2023 · 120 posts · 26 votes
    1y

    @Sam Brock,

    Nice deal.

    1. Should be no issue. This is quite a normal deal for a lender, your numbers are good.

    2. Yes, do DSCR. Separate mortgages.

    3. You don't consider selling the properties at completion instead? Depends on preferences and net yield.

    With this type of deals, you're not interested in building for investors, doing more projects? 

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