Hi BP Experts,
I have been thinking of expanding my portfolio once I reach the limit for financing 10 properties and cannot get conventional financing rates. (Currently between my wife and I, we have 11 properties and we should hit 20 over the next 2 years. I understand we can combine multiple properties in a portfolio loan or pay down some properties but I want to run at maximum leverage and keep cashing out as the properties increase in value, and don't want to lose that option)
Here is a scenario which I was thinking and was wondering how this can be executed-
Assume, there is a property available for 300K which I can rent for $2500/month. Taxes are around $250/month, Insurance- $50, and maintenance- $125. If I can find an investor who is willing to lend me this entire 300K at 7% interest only loan (costing $1750/month), then with this property I can net around $150/month ( 2500-1750-250-50-125, and assume 175/month for vacancy).
Instead of owning the title in my name, I can create a company( not sure what type), where I own 100% of the shares and that company can hold the title of the property- This ensures it is not counted against my 'number of properties' limit.
Now, 7% is too high compared to conventional mortgage rates. The question is how can I refinance and get conventional mortgage or any other kind of mortgage, where the lender sees that this is a cash positive property and lends to the 'company' without I personally be on the title or mortgage.
I might have not used the right technical terms so please excuse in advance.
@Rian Ash It is easy to buy a property in a company, like an LLC. You can then get a commercial loan in the name of the LLC. You will most likely need to guarantee the loan personally but that doesn't mean it shows up on your credit report or that is would count against a loan limit.
You can get a commercial loan (no DTI requirements) with an LLC. Non-recourse is more expensive, but shouldn't count against your property limit.