All Forum Posts by: Seth Hayes

There's nothing wrong with your approach so long as you don't overextend yourself with your borrowing. Make sure the properties you are borrowing against still provide enough to cover the borrowing and still turn a profit. That way you don't have to rely on the new acquisitions to cover the expense incurred to acquire them.

The biggest drawback is the liability protection you get from your LLC. You really just have to put a price tag on your peace of mind.

If you wish to transfer it back to your personal name, you may want to consider moving it to a land trust and making yourself the beneficiary. This won't provide the protection of an LLC but it will provide a little bit of masking when people start digging to see how many properties you personally own to determine how big of a target you are.

You'll need to do a Joint Venture or create a shared entity like Brian mentioned above in order to make sure you don't run afoul of the law.

I'd highly advise you to stay away from securities when you have $100k to play with. You'd be better off having all your money tied up than trying to navigate through the mine field of securities laws which can land you in hot water easily.

It's not much more difficult to lend to entities with multiple owners than it is to single owner entities. It all boils down to providing the documentation of all partners.

A residential mortgage broker won't be able to help you, other than to steer you toward a commercial broker.

Most lenders will only finance around 70% LTV. This will be based on the purchase price instead of performance, so be prepared to come to the table with a decent sized down payment.

Also, you'll want to make sure you're making your offer based on CAP rate, so you can realize a better cash flow and improved property value over time. Be mindful of what CAP rate lenders use for valuation in the area you are buying in.

As mentioned by others, business credit isn't as big of a concern with real estate investing because you will almost always be required to personally guarantee any loans you take. Don't let that discourage you though, as it will have the effect of causing you to focus more to make sure you are making good deals. It's so much easier to jump into something when you have minimal personal risk.

Most commercial lenders don't get hung up on your down payment money being borrowed so long as it isn't secured by the property you are trying to borrow against with them. It is no problem at all to use a line of credit on another home to finance another purchase.

Nowadays, Hard Money Loans are typically associated with short term deals; primarily the kind of loans made for flips. They normally only last between 12 and 24 months and carry a higher interest rate as well as points up front. When the numbers work for a flip, most investors are ok paying the higher rates when they have no other avenues to obtain the funding.

Long term loans and specifically lenders don't charge HML rates. Your rates will be higher than you see for owner occupied residential mortgages, but you can easily get a 20 to 30 year commercial loan with a 70% LTV on your commercial properties in the 5% range these days.

Fannie and Freddie aren't the only options, though the do yield the best interest rates. You can get commercial financing on single family rental properties at rates in from the mid 5s to the low 6s and have no limit to the number of mortgages you have. You will only be able to get 75% LTV, but it certainly opens up more doors than Fannie and Freddie, as well as providing you with more flexibility. Fannie and Freddie tie bank's hands too much in ways that you don't get through a commercial mortgage.

A good broker can help you map out a strategy to maximize your investment strategy.

A good mortgage broker is worth their weight in gold. They can cost you a little extra, but there are plenty out there that have a minimal financial impact on your investment deal.

Where the mortgage broker earns their pay is by eliminating the hassle of going to a couple dozen lenders, getting half way into the process, only to find out they can't help you. A mortgage broker already has established relationships with multiple lending institutions and can take your information one time from you and know who to pair you up with. This can be particularly valuable when you are facing time constraints and a need to close quickly.

Ken,

A commercial loan can be made for any non-owner occupied resident that is used for investment purposes. 

You are not off in your understanding regarding the number of units being a factor. Typically 4 units and under fit into one category, while anything with 5 units or more falls into another. Where you see the difference is in the lending requirements and costs associated.

You can obtain a commercial loan for a single family home to fix and flip, or buy and hold. Those are two different types of loans as well. While the fix and flip will be a short term hard money loan that lasts between 6 months and 18 months, a buy and hold loan will be longer term, with or without a balloon payment, amortized and lasting between 20 and 30 years. 

A good mortgage broker can save you the hassle of making 10 minute calls to 30 or more banks to try to find a lender that fits. They can take your information, find out what you are looking accomplish, then provide you with multiple lenders and options to choose from.