LA Based Investors Seeking Commercial Loan Advice

5 Replies

Hi, myself and two partners have recently formed an LLC (tax treatment as a multi-member partnership) to invest locally. I'm curious if anyone has any experience with commercial loans for small, residential buy and hold rental property acquisition. We're seeking this method, as opposed to conventional, so the LLC's debt will not impede our ability to borrow money as individuals where our own homes are concerned. Any advice or company recommendations would be great, thanks!

Alex.

You're looking to buy single family homes in Los Angeles to rent and produce cash flow?

@Alex A. What makes you think that you’ll get approved with a fresh LLC with no business credit and no assets get approved for a loan. You will need to sign off your assets, credit scores, and of course be personal guarantors for your LLC. Your house will never be safe and that llc debt will always be a part of your capacity to borrow. UNLESS, you pour an enormous amount of cash —let’s say 40% — of your to-be purchased property, put it in your llc and buy it off from the llc, maybe some creative lenders will be willing. This way you’ll have all your wish granted, Cash Flow + borrow capacity stays.

@Alex A. , it's doable. Start with local banks and their commercial lending departments. You'll have to shop around and expect a lot of "we don't do that" type of answers coupled with some suggesting that you deed it out of the LLC so they can make the loan to you personally. Just move on to the next bank until you find one that understands what you are doing. They are out there.

Expect to be required to sign personal guarantees on the loans. There’s most likely no way around this (until you achieve scale and have an extensive track record).  The loans won’t count against your ten loans for Fannie/Freddie, but the debt will count against you as a contingent liability as a result of the personal guarantee. 

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