Ways to get financing as an LLC for STR's?

Question

For some context, I have been told you can't close in an LLC in CO if you are obtaining financing, I am not sure if that is entirely accurate. Either way, I am looking for a workaround to close in an LLC but also obtain financing for Short term rentals. I myself cannot qualify for any traditional financing, but I have a long list of investors willing to put their money into deals. What I have done in the past is just take the joint title but that caused them to go through the mortgage app. process which was a chore and none of my other investors will waste their time going through that.

All that said, does anyone have any ideas on possible structures? I have looked into doing a syndication-type model but that won't work as of right now. Does anyone know of a structure where I can obtain financing without having a partner go through the loan application process?

All that said, does anyone have any ideas on possible structures? I have looked into doing a syndication-type model but that won't work as of right now. Does anyone know of a structure where I can obtain financing without having a partner go through the loan application process?

Erik Estrada · Answer

Hey Brett,

You can have title under an LLC with a DSCR loan but you would need to have either you, your partner, or both to personally guarantee the loan.

Kerry Baird · Answer

I have over a dozen houses with DSCR mortgages, because we hold in an LLC.  You are trying to use the wrong product if you mix a conventional lender with that entity structure.  Even if you do get a lender to approve in your own name and then transfer title, it can cause transfer tax issues.  DSCR allows you to go direct.

Stephanie P. · Answer

You need a good mortgage broker that can help adapt your particular situation to specific lenders that can close with partners etc...  Conventional lenders will not allow this because they can't sell those loans to Fannie and Freddie.  Not even all DSCR lenders will allow this because most want to have 60 days sourced and seasoned funds for down payment, closing costs and 6 months reserves.

Even though you don't qualify for traditional financing, you may qualify for a DSCR loan, but you definitely need a broker to help you structure the moving parts.

Stephanie

Mohammed Rahman · Answer

Hey @Brett Deas - I recommend getting in touch with a private lender (they will often attend RE meetups and events) that can back your deals and possibly later partner with. If the private lender can back you for a short while 1-2 years, then you can show your STR income to the bank as the LLC's income and potentially qualify for a mortgage then to refinance out of the private lender's note.

There are a lot of ways to approach this, and since you already have a list of investors, it would make most sense to just hit them up asking to back you.

Melvin List · Answer

@Brett Deas yes you can do a DSCR mortgage.  Besides your credit score the loan is just based on the rent of the property.

Eliott Elias · Answer

DSCR loans, @River Sava can help

Ways to get financing as an LLC for STR's?

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