Wondering if this is possible or am I just wasting my time.
Is it possible to find a local bank or credit union that lends as a commercial loan to a LLC for single family homes?
If so is it possible to get rates 5% or below without crazy high fees?
@Philip L.
Call a few dozen credit unions and ask. That’s the only way to find out.
Philip,
I wanted to see if you were asking if you could obtain financing to an LLC for a single family home. You can get financing to take cash out of a commercial property using an LLC to buy a SFR. You can also qualify using an LLC to buy a single family home(s). As far as rate residential loans are under five percent currently for traditional financing. Portfolio or commercial loan rates will vary depending on several factors, credit score(s), LTV, Loan size etc.
@Jason Wray Thank you that's been very helpful and I'm very pleased it is possible, I've spoken to a large number of lenders and getting a lot of no's or we only do personal loans or we only do 5+ units or more - I'll keep calling now I know it can be done.
@Marco G. Spoken to three CU in my area and two of them don't do inhouse lending and bounced me to an external company who only offers personal loans and the other one said all the right things at the start but insisted the property needs to be transferred into my personal name then said once that is done I will need to start the seasoning period again and after some questioning it turns out they only do personal loans!
@Philip L. it is possible. Peapack-Gladstone bank in NJ is currently working on a loan for me at 3.5% for a 2 family in an LLC. Anything you are buying in an LLC will be commercial. Peapack is a great local bank. I'm not sure if they will lend on something out of state but give them a try. If you can't get them to do it you will find a local bank in your area just keep dialing. I actually found peapack buy calling a bigger local bank, they said, that's too small for us, call peapack they are great they will help you. When I heard that I new I found what I needed.
@Jason Wray Thank you that's been very helpful and I'm very pleased it is possible, I've spoken to a large number of lenders and getting a lot of no's or we only do personal loans or we only do 5+ units or more - I'll keep calling now I know it can be done.
@Marco G. Spoken to three CU in my area and two of them don't do inhouse lending and bounced me to an external company who only offers personal loans and the other one said all the right things at the start but insisted the property needs to be transferred into my personal name then said once that is done I will need to start the seasoning period again and after some questioning it turns out they only do personal loans!
The loan officer you spoke with was probably trying to get you a conventional residential mortgage. Transferring out of the LLC then back in is something that happens a lot with investors using conventional mortgages. The key is learning all the right language and using it properly. This is a scenario where using the wrong words will lead to confusing conversations, and loan officers are salespeople. Most of them are pretty bad so they're just scraping for every deal that comes there way. So, if you get really clear on the words you're using and understand when a loan officer is grasping then you'll have a better time searching. Also, you're looking for something that is very rare.
You said you wanted a "commercial loan to an LLC on a SFR". The truth is that you're looking for a loan in a market that isn't very attractive for a business owner so not many business owners are interested in serving it. As you indicated with your search results you've found a lot of lenders doing residential mortgages (not personal, residential), or doing commercial at 5 units plus. They do 5 units plus because conventional residential mortgages can do up to 4 units. Commercial is a different ballgame and don't typically compare with conventional residential rates. Many investors looking for residential real estate secured by a mortgage are going for conventional mortgages. There just aren't many people interested in that in between space which is why they're hard to find.
If you're buying residential real estate, then residential mortgages will save you money, that's why there isn't a market for commercial loans for SFRs because it cannot compete with other loans people can easily obtain for the same property. What is the purpose of using an LLC and a commercial loan? Why not buy as a "natural person" with a residential mortgage then transfer to your LLC?
I used the term "natural person" because residential mortgages are typically using that term to indicate who they do loans for, but mortgages are not "personal loans" they are secured loans.
@Chris Turek That's awesome and very inspiring to hear, I've taken a look over their website and it says for businesses based in New Jersey however I will send them an email and try to track down more local banks in my area who offer this for Michigan businesses.
@Philip L. it is possible. Peapack-Gladstone bank in NJ is currently working on a loan for me at 3.5% for a 2 family in an LLC. Anything you are buying in an LLC will be commercial. Peapack is a great local bank. I'm not sure if they will lend on something out of state but give them a try. If you can't get them to do it you will find a local bank in your area just keep dialing. I actually found peapack buy calling a bigger local bank, they said, that's too small for us, call peapack they are great they will help you. When I heard that I new I found what I needed.
Are you sure you are actually closing in the name of the LLC? The name of your LLC is on the paperwork?
Their website does not have a tab for "commercial lending" only "residential and consumer lending"...That's why I'm asking because those rates line up with conventional residential mortgage rates. Very few lenders doing actual commercial mortgages on a 2 unit residential property...
@Philip L. it is possible. Peapack-Gladstone bank in NJ is currently working on a loan for me at 3.5% for a 2 family in an LLC. Anything you are buying in an LLC will be commercial. Peapack is a great local bank. I'm not sure if they will lend on something out of state but give them a try. If you can't get them to do it you will find a local bank in your area just keep dialing. I actually found peapack buy calling a bigger local bank, they said, that's too small for us, call peapack they are great they will help you. When I heard that I new I found what I needed.
Are you sure you are actually closing in the name of the LLC? The name of your LLC is on the paperwork?
Their website does not have a tab for "commercial lending" only "residential and consumer lending"...That's why I'm asking because those rates line up with conventional residential mortgage rates. Very few lenders doing actual commercial mortgages on a 2 unit residential property...
I'm 100% sure I'm closing in an LLC. I understand this sounds too good to be true. It took me a long time to find these guys. Over the summer I was getting quoted between 5.0% - 9.5% on the same loan. Call Amaro below. He only does commercial, I believe you need to speak with someone as for a non-commercial. There are a NJ based small bank so they probably will only want to deal with NJ or tri-state properties but my point of sharing was it took me 100 calls and a bit of luck to find them. The key is to call banks then are small. As someone above mentioned any large bank doesn't want to do loans under $1,000,000 so you need to find a bank who thinks it is worth the time. Research you local area find bank with 5-15 branches. Most want to do business banking. If they do business banking they probably do business lending. It will help if you create a relationship with them by moving your LLC and personal business accounts to them. Once they do 5 loans with you they will want your 6th loan and work with you to find a creative solution. Update I tried to post my banks phone number and email but seems like I can't because of the forum rules but you can call Peapack and ask for him.
Thanks
Chris
@Philip L. it is possible. Peapack-Gladstone bank in NJ is currently working on a loan for me at 3.5% for a 2 family in an LLC. Anything you are buying in an LLC will be commercial. Peapack is a great local bank. I'm not sure if they will lend on something out of state but give them a try. If you can't get them to do it you will find a local bank in your area just keep dialing. I actually found peapack buy calling a bigger local bank, they said, that's too small for us, call peapack they are great they will help you. When I heard that I new I found what I needed.
Are you sure you are actually closing in the name of the LLC? The name of your LLC is on the paperwork?
Their website does not have a tab for "commercial lending" only "residential and consumer lending"...That's why I'm asking because those rates line up with conventional residential mortgage rates. Very few lenders doing actual commercial mortgages on a 2 unit residential property...
I'm 100% sure I'm closing in an LLC. I understand this sounds too good to be true. It took me a long time to find these guys. Over the summer I was getting quoted between 5.0% - 9.5% on the same loan. Call Amaro below. He only does commercial, I believe you need to speak with someone as for a non-commercial. There are a NJ based small bank so they probably will only want to deal with NJ or tri-state properties but my point of sharing was it took me 100 calls and a bit of luck to find them. The key is to call banks then are small. As someone above mentioned any large bank doesn't want to do loans under $1,000,000 so you need to find a bank who thinks it is worth the time. Research you local area find bank with 5-15 branches. Most want to do business banking. If they do business banking they probably do business lending. It will help if you create a relationship with them by moving your LLC and personal business accounts to them. Once they do 5 loans with you they will want your 6th loan and work with you to find a creative solution. Update I tried to post my banks phone number and email but seems like I can't because of the forum rules but you can call Peapack and ask for him.
Thanks
Chris
That is a smokin' deal! I commend you on your diligence because it can get real annoying...
I do private lending and do rates in the low 5's for 75% LTV cash-out. So I assume a credit union should be no problem.
@Daniel Hennek - yes just speaking with lenders over the past few weeks has been very confusing, partly my fault with the lack of knowledge for sure and using the wrong terminology has definitely derailed me on a few occasions.
Yes from what I have found so far I seem to be in limbo between the two industry's and this is part of my frustration.
Why use an LLC and commercial loan? well my initial understanding was liability (I now know there are other ways), I'm really trying to build a business more than just invest money, the commercial loans seem to have less limitations so a focus on the cashflow of each property not my personal income, unlimited mortgages not just capped at 10. I purchased the property in the LLC if I change it over to my personal name I've been told it will reset the seasoning period back to 6 months also some of the lenders I have spoken to don't even have a seasoning period and I like the ability to move forward without having to wait
we have used inhouse loans for our llc , buying all sfr's it is usually a 15 to 20 year amortization, a 3 to 5 year lock on interest rates , they have ran 5.6 up to 7.6% so far. bought over 40 this way, We do have to sign personal Guarantees also. but the liability's are why we use this method of LLC's . So I guess i still have 10 mortgages available to me. These houses started paying off last year. As long as they cash flow I'm buying.
@Ray Fisher awesome 40 is my long term goal
That great Phillip , creative financing has been my goal. The Old Carlton Sheets methods is where we started , unless its in my Ira funds, We try to buy everything NO money down.
@Ray Fisher I love seller financing deals if you can find the right person - I focus on getting as much of my money back out
@Philip L.
Philip, it’s a pretty common strategy. We’re about to start the cash out refi process on a single family brrrr...commercial loan in our llc and should be around 4-4.25%...5 year arm and 20 year amortization. Good luck!
Hey @Ryan O'Connor nice ...so in 5 years what does the interest rate move up to or does the bank decide that in 5 years? 4% that's a very good rate for commercial are you doing this through a credit union or bank?
@Philip L.
The bank determines the rate increase at that time, and believe it’s capped at a 2% increase every 5 years. It’s a local bank I’m going through for this particular deal, and I know of at least one local credit union I can go through as well.