Financing for LLC's first deal

[Account Closed]

Hello, me and a group of about a dozen friends are going to form an LLC to pool our money together to purchase some rental properties. We should have a decent amount of money between the group of us, but it won't be enough to purchase something outright. Nobody will want to take out a traditional mortgage in their personal name, so all financing will be through the LLC.

What kind of financing options will be available to us?

What should be our first few steps to start to research potential lenders?

What percent should we expect to have to bring to the table? 20%, 30%, etc.

Is there a certain type of property that would be easier to obtain financing on then others? Multifamily, mixed-use, apartments, etc.

Any advice would be much appreciated. Thanks!

[Patsy Waldron]

- Financing: Your LLC will apply for commercial loans through the commercial lending department of any bank.

- As usual, local banks can be easier to deal with as they often do their own underwriting and can be flexible. 

- For commercial loans, especially starting out, you should expect to put 25%-30% down AND have cash reserves to cover anywhere from 6 months to 1 year of mortgage payments (principal + interest).

- Type of property: Each bank will have its own set of criteria for what type of property it prefers to underwrite. I don't own commercial property, so can't speak from personal experience, but I have heard that banks prefer residential to commercial. 

With this particular scenario (several owners), I would start with a smaller multi family property, figure out your system and work out the kinks in your process, show the bank that you guys can run it well, and then go bigger. Good luck!