Financing/Loan Possibilities with an LLC

[Rob Paone]

Hey everyone, 

A friend and I are looking to begin investing in rental properties, starting with 1-2 properties this year and scaling upwards from there. 

We'd like to start an LLC to shield our personal assets, but I've seen in my research that it's significantly more difficult to receive any type of mortgage/loan through an LLC than it is through a standard mortgage.

We'll have enough for 25% down payment, plus additional reserves in the bank, but I'm curious as to the possibilities of actually getting a mortgage/loan using an LLC rather than purchasing through an individual.

Are there any banks that are more apt to lend to LLC's, or specific commercial programs that would allow for such a practice? Thanks for the help and sorry for the basic question.

-Rob

[George Despotopoulos]

Hi Rob, welcome to the forums. You may have issues with traditional financing through an LLC. Non-bank lenders exist that will underwrite to entities though. Routinely they're referred to as "private lenders" or "portfolio lenders," I like to think of them more as specialty lenders.

Usually how it works is that although this is a residential rental property it is underwritten as if it's a commercial loan. The primary focus will be on the rental property's income, not your own, nor your partners, and also on the debt service coverage ratio (basically the net income from the property divided by the loan payment). Rates will be around 7%-9.9%. 

Happy to answer any questions; feel free to pm / call.