Real Estate Investor · CA · Member since 2011 · 47 posts · 14 votes
want to buy a 2-4 unit building here in Calif. Will be partnered up with 1 other person and will hold the building in an LLC.
The situation
- property will cost ~750K, wont need major rehab, would pay any rehab in cash.
- both partners good credit
- want to have 30 year fixed amort financing, plan to buy and hold
- cash down payment of 25 or 30% is avail
- no experience in prop mgt or RE investing, will outsource prop mgt
- One partner has W-2 corp job, other is taking some time off but doing part time consulting. Had W2 job in 2018. DTI sufficient for either partner to buy property.
Major importance to keep LLC "veil" intact.
My questions
what type of lender to consider?
what is their underwriting criteria?
Will lenders want a personal guarantee?
would placing significant reserve cash ($50-100K?) into the LLC make any difference, knowing that the LLC owners could move it out i assume not.
Lender · Columbus, OH · Member since 2019 · 114 posts · 61 votes
7y
Do you or your partner have a bank that you/they have a substantial amount of assets in? I've found the best rates for lending to an LLC are coming from the "Private Banking" side, which is normally offered to customers who have a larger amount of holdings within the bank
Do you or your partner have a bank that you/they have a substantial amount of assets in? I've found the best rates for lending to an LLC are coming from the "Private Banking" side, which is normally offered to customers who have a larger amount of holdings within the bank
No, use typical discount brokers to hold investments at this point. Possible to adjust where keep some funds.
Lender · Springfield, MO · Member since 2015 · 379 posts · 180 votes
7y
@William P., This depends on what type of lender you are going to; bank vs private.
Generally banks will lend based on BOTH property DTI AND personal DTI which can cause some major issues in underwriting. They will also generally offer shorter amortization periods when lending to an LLC.
Private lenders (institutional) wil underwrite to the property's income or, if the is an issue, there are a growing number (still only a few) that can offer long term loans simply based on the asset and LTV. With private (institutional) lenders you wont have any problems with lending to your LLC and you'll get a 30 yr amortization in almost every circumstance.
@William P.," This depends on what type of lender you are going to; bank vs private.
Generally banks will lend based on BOTH property DTI AND personal DTI which can cause some major issues in underwriting. They will also generally offer shorter amortization periods when lending to an LLC. "
Greg - I assume that if the bank is using personal DTI to assess the loan, then the bank mortgage docs will provide the lender recourse to my personal assets as well even if the asset is held in LLC?
Lender · Colorado Springs, CO · Member since 2018 · 241 posts · 98 votes
7y
@William P. Commercial investment loans are also available. 30 year terms are available. Upto 75% LTV as long as the property cashflow supports that loan amount. Generally they will require a personal guarantee from both partners.