Hi BP Community!
I have an LLC and am interested in commercial real estate intown. But, I'm not quite ready to start investing in any one particular property yet. I've wondered if building up business credit and a relationship with a banker, before I need a commercial loan, would be helpful. What do you all think?
Does anyone know any REI friendly banks for small businesses? I've read some good things about Citizens Trust Bank, but don't have any experience with them. I've heard smaller banks may be more likely to lend to a small business. Is this true? Any advice would be greatly appreciated!
Tracie, most small banks in my experience won't lend to a LLC, especially with no history and not for flips. If you still have a W2 you can finance in your name for buy and holds and title it later into the LLC. As long as you pay the mortgage no problem. Mostly likely you need a hard money lender.
@Tracie Cabler I have found Wells Fargo to be small business friendly. I can't speak for REI friendly as far as loans for acquisitions. My initial SB experience with them was outside of the real estate industry, and we've used them to establish business credit. However, they still request a personal guarantee for new businesses, as I would guess that most do. Good luck!
Echoing Kevin, most banks will not lend to an LLC unless it has a significant business credit history, or you are personally guaranteeing the loan.
@Jeff Garzik @Kelly Rambo @Kevin Polite thank you guys for the information. So even building a credit history for my LLC probably won't help? It sounds like you all are saying I will likely need an investor / partner with significant funds in order to take out a loan. But, that makes me wonder how other small businesses receive loans from banks. Are they typically taken out in their own name? The whole point of the LLC was to separate the business from my personal assets, so I'm not sure taking out a loan in my name is something I would want to do.
When you hear "small business loan" that is normally for office equipment, inventory, things other than real estate.
I understand the motivation - I once thought as you do - but that's the reality of real estate lending. You'll usually need some sort of guarantor that will not declare bankruptcy the minute something goes wrong; too easy to do that in an LLC.
Once you have a track record, private money folks will lend to you, and on larger properties (large MF) commercial real estate banking looks almost exclusively at the property.
Spend some time researching the financing options. Having the money is what unlocks real estate... so you must become an expert on finding the money. Know which loans you can and cannot qualify for. Understand short term (bridge/hard money) versus long term loans.
@Tracie Cabler I advise attending GaREIA And Atl REIA meetings and talking with some of the lenders that are always there. You will have to have some skin in the game. Not necessarily in the entire amount. Most private lenders/hard money lenders will lend say 10% of ARV and anywhere from 8%-12% with 2-5 points. It's will become lower as you get more deals under your belt and even to the point where some smaller local banks will lend to your LLC. If you're buying a rental property you can go to just about any bank and they'll loan you the money, but not for the fix up and will you'll need to be working with a W2.
@Kevin Polite you've given me some reading now to do, thanks so much! Definitely have to learn more about the financing side of things. @Jeff Garzik that's a great suggestion. I've been to the ATL REIA up near Perimeter before (or maybe that was a BP Meetup, can't remember), but I'll go again and start asking financing questions.