Financing BRRR question - commercial or personal loans?

4 Replies

So, I have a question about financing rentals and flips.  Here is my current situation (I’m in the Raleigh, NC area):

Wife and I have high 700 credit scores and W-2 income

We have an LLC which we have not used to purchase property (just switched the purpose to REI). All the below business lines and credit are entirely unused.

$50,000 business line 8%

$25,000 business credit card 10%

$48,000 business credit card line (0% until 9/18 3% transfer fee)

$27,000 business credit card line (0% until 9/18 3% transfer fee)

Personal credit line $25,000 (9.25%)

Personal home equity line $104,000 (3.4%) using this for current flip rehab

We just bought our first flip project under my name and plan on more. However, I'd like to start investing in rentals using the BRRR strategy but I'm wondering how to finance it?

Do I purchase through the LLC? If so, will I have trouble refinancing afterwards?

Or do I buy the properties under my wife and or my name but then forego access to the business lines?  Could I use my business lines to fund properties under our personal names?  

I imagine this is pretty common for those of you with LLCs so I'd love to hear some advice about the best way to line up financing. I want to start investing in multiple properties and setup a financing structure we can repeat consistently that won't handcuff us in the future (DTI, cash on hand, etc.). Thanks in advance for any help you can provide!

Hey Bock, I recently purchased my first 3 deals using a personal LOC. I'm sure there are plenty of lenders who will refi if purchased through an LLC, but the lender I used said I would not have been able to refi if I purchased through an LLC.

I talked to dozens of lenders before I found newpennfinancial. Many lenders would not let me refi under the delayed financing exemption. They all wanted to base the LTV off the purchase price and not an appraised value like the FannieMae guidelines state you can do, or have me wait 6 months. But with newpenn I'll be getting almost all the LOC cash back so I can keep BRRRRing.

If the numbers work to wait 6 months that will open you up to a lot more lender, some of which should be able to refi a purchase through an LLC, maybe you might need to personally guarantee the loan.

Also keep in mind if you refi before 6-12 months you most likely wont be able to use the rental income to help with DTI.

didn't really answer your question, but I wanted to share some of my experiences. There are many good lenders here on BP, that will give you a better answer.

Originally posted by @Jonathan Carter :

Hey Bock, I recently purchased my first 3 deals using a personal LOC. I'm sure there are plenty of lenders who will refi if purchased through an LLC, but the lender I used said I would not have been able to refi if I purchased through an LLC.

I talked to dozens of lenders before I found newpennfinancial. Many lenders would not let me refi under the delayed financing exemption. They all wanted to base the LTV off the purchase price and not an appraised value like the FannieMae guidelines state you can do, or have me wait 6 months. But with newpenn I'll be getting almost all the LOC cash back so I can keep BRRRRing.

If the numbers work to wait 6 months that will open you up to a lot more lender, some of which should be able to refi a purchase through an LLC, maybe you might need to personally guarantee the loan.

Also keep in mind if you refi before 6-12 months you most likely wont be able to use the rental income to help with DTI.

didn't really answer your question, but I wanted to share some of my experiences. There are many good lenders here on BP, that will give you a better answer.

Thanks for taking the time Jonathan! I assume New Penn refinances if the property is under my LLC? What types of rates do they offer compared to more conventional 6 month seasoned refinances?

Do you have an LLC or do you keep everything under your personal name? You had said, you purchased your first 3 deals using a personal LOC but I was curious as to how you approach things now if you have an LLC. Thanks again!

@Justin Bock I used to work at New Penn Financial out in Raleigh.  I could definitely give you some contacts out there of a great group of people who can really help you out.  The main person I would suggest you talk to is Daquan Daniels.  He is a very knowledgeable and helpful young man who will definitely get you the answers you need.  Shoot me a PM and I'll get you more info.  Hopefully this helps you. 

@Justin Bock ,

I love that you have business credit already, it'll make things alot easier moving forward for you. I would use those BCC's for the rehabs as soon as possible to draw on them at 0% for the next twelve months. I would purchase in the LLC whenever possible, unless you are prohibited via contract (some foreclosures/REO's are like this).

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