Financing Advice

9 Replies

Would love anyone's feedback on the following scenario:

My wife and I own a few single family home rentals. We plan on selling one and doing a 1031 for about $70K equity from one of those homes and utilizing that to fund our undivided interest in a TIC. We are in the process of collaborating on a joint venture with a like minded individual to pool funds together to explore opportunities in the multi-family space.

Through conversations with local attorneys as well as professionals / investors on Bigger Pockets we've decided on having the TIC owned by 2 separate single member disregarded entity LLC's with a joint venture agreement dictating the arrangement between the 2 LLC's. As long as we abide by the 1031 rules we shouldn't have an issue deferring the gain.

My question / concern comes down to finding a lender who is comfortable in lending in such a scenario. Does anyone have any experience / success / tips in narrowing down the search for lenders who might be open to this?

Appreciate any thoughts you might have.

Have not had to go to a lender for anything like that but if you are going to a bank, you are looking at a commercial loan, so you will want to talk to a commercial loan officer, but ask to deal with the head of the department. chances are you will both probably have to personally guarantee the loan. having some type of structure breakdown written up by your attorney will probably help the lender understand how it will be set up and will help show how serious you are about it and the business.

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@Jeff Adema , Two of the best sources will be your local community banks and the self directed IRA market. The charters of community banks specifically gear them to local investment. They keep their loans in portfolio so are not as sensitive to one-off loan scenarios as wholesale banks. And your scenario is perfect for the self-directed IRA owner. @Patrick Liska makes a good point about the probability of a personal guarantee requirement.  But postured correctly this actually can be seen by the bank as a positive.

Hi Dave, thank you for your feedback.

can you elaborate on the self directed IRA? I have stocks bonds and other investments in my IRA"s but I'm a little confused as to how it would be able to lend? Forgive my rookie question.

@Jeff Adema

A self-directed IRA is held by a specialty custodian with the paperwork and business model to document non-traditional assets such as private promissory notes or mortgages.

You could not setup an IRA and lend to yourself for your project however. What @Dave Foster is indicating, I believe is that you network with folks who have self-directed IRAs to see if one might be interested in being a lender on your deal.

@Jeff Adema

Another option is to open a self-directed IRA and incorporate a TIC transactions alongside your IRA.

Also, you could form an LLC and pool your IRA along with your personal funds an other investors and then invest in real estate through the pooled LLC.