Real Estate Business Financing

[WichitaDM]

A friend and i are starting a llc to buy properties with the purpose of renting them. Since some of you have are are doing this then i figured i would see what the best way to go about finding a suitable lender for this type of thing. We are looking to buy a few properties to start putting 10-20% down. Also is there anyway to borrow under an llc umbrella with 0 down? Thanks in adviance

-Dan

[gordongecko]

Well the only way your going to get 100% financing at a halfway decent rate is if you found a very very good bargain or you have the collateral to back the loan and then some. You make your money when you buy, not when you sell. The more you put down, the better % return you will get on your monthly cash flow as well. Your best bet is start out acquiring properties subjet to, or subject to exsisting financing. Basically you take over the sellers exsisting mortgage, without having to take qualify for the loan yourself. Doing this can be very lucrative, but also very dangerous if you get to greedy. Just because your not shouldering the risk of financing yourself, doesnt mean you can put any house you find on contract. I have helped a couple other 2+2ers out with creative real estate investing, so if you want to talk about this over aim send me a pm with your aim name.

[snowbank]

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The more you put down, the better % return you will get

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[img]/images/graemlins/confused.gif[/img]

exactly the opposite is correct

[snowbank]

Buying properties through an LLC with the purpose of holding for cashflow is probably not the best option. Here's why:

When buying through an LLC I'm pretty sure you will be paying commercial rates, and also have to put a downpayment down like it was a commercial property a lot of the time(25-30%). Sometimes you can get away with buying it yourself with a lower rate and less money down, and then quit claim deed it to your LLC. From what I understand though, sometimes they won't let your LLC take over payments like that. Sometimes you can. (I haven't used an LLC yet myself for this so sorry I can't be more specific)

[Nomad84]

I know virtually nothing about this topic, but I think I've heard of buying property with an LLC, but getting financing by providing a personal guarantee. In other words, the financing is still in the name of the LLC, but you are stating that if the LLC fails to make payments for any reason, you personally take responsibility for the loan. This may negate some of the goals you are trying to accomplish with the LLC, but the LLC will still provide other liability benefits. By going this route, you can get financing based on your own good credit even if the LLC is brand new with no assets and no documented creditworthiness.

[gordongecko]

[ QUOTE ]
[ QUOTE ]
The more you put down, the better % return you will get

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[img]/images/graemlins/confused.gif[/img]

exactly the opposite is correct

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The less you put down the higher your monthly payments will be, meaning the less positive cash flow the property would produce? Where am I losing you? Maybe I worded it wrong, but at any rate my point is valid, just not clear hah.

[elus2]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
The more you put down, the better % return you will get

[/ QUOTE ]

[img]/images/graemlins/confused.gif[/img]

exactly the opposite is correct

[/ QUOTE ]
The less you put down the higher your monthly payments will be, meaning the less positive cash flow the property would produce? Where am I losing you? Maybe I worded it wrong, but at any rate my point is valid, just not clear hah.

[/ QUOTE ]

He probably means that you make more money on appreciation by using more leverage.

[tribefan9]

Putting more money down will reduce your return (assuming it is a profitable endeavor) since the return is measured off of your original investment. Putting more down will obviously reduce the monthly payments and make it easier to obtain financing at decent rates.

I have closed properties straight to the LLC as well as closed them in my name then executed a quit claim deed to place the property in an LLC. They both end up with the same result, but there is a bit less paperwork and hassle if you close it in your name then place it in the LLC. This may not be the case with a partnership, my properties are only in my name. You will be paying a premium to the lender either way since the property will be classified as investment rather than your personal residence.

The best advice would be to open discussions with a lawyer and lender that you trust to help make the best decision.

[SteveOMS]

Nomad has this right, the LLC will protect you (lawsuits, damages etc...) but will be hard to get a loan without a personal guarantee. In this market except to be asked to put don 25% for a conforming loan maybe even higher for a jumbo loan with a personal guarantee and good credit and income requirements. I would be very careful here jumping in the rental game for the first time, maybe sure you know the sales market your buying in and the rental market, don't depend on brokers with giving you good figures!

SteveOMS

[snowbank]

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Putting more money down will reduce your return (assuming it is a profitable endeavor) since the return is measured off of your original investment.

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yes

gekko please read this [img]/images/graemlins/cool.gif[/img]