Hi, Does some one out there have experience to buy an apartment using down payment assistent and pair up with a person who has good credit ?
I heard people saying that you can pair up with a person who has good credit score in the 700+ to form a LLC, after the financing done, you can remove that person from the LLC. How can this be done? I could not figure out, because the lender will check the person with good credit and will issue the loan to that person? or LLC? how can I remove that person from my LLC? what about the loan? will the loan attach to the person ? or LLC ?
( I had encountered a good deal of an apartment (in Houston), which I was failed in passing the financing 80% LTV for I don’t have good credit ), the broker said that I can pair up with a 700+ credit person, I was not able to find one).
Could some one know how to do that?
Thanks
te06
With bad credit you will never be able to buy the property yourself. What you want is to form an LLC and have that LLC buy the property. The bank will be interested in the credit of the owners of the LLC and they can’t all have bad credit so it is not likely you can do this deal with you and another person. It will likely take at least 3 to “dilute” the one with bad credit. You can help out if you can show the bank that you bring something else to the deal like management experience or a lot of cash etc.
Thanks Bluemoon06, if the bank approve the loan, so the loan will be in the person name? or the LLC? in fact , will any bank/lender issues loan to the LLC? Can this be done ? people told me (actually the broker) once the loan approval after the closing, I can remove the person from LLC (well, the good credit person does not want to hold the apartment anyway), if the loan is issues to the person, how can I remove the person from the LLC? Can I ?
( yes, I can bring in cash and mgmt experience )
Thanks
Not all banks will work w/ LLCs. You’ll have to call around and see who does. If the bank does loan to an LLC, the loan will then be made in the LLC’s name - not a personal name. If the loan was in a person’s name, then it would be their credit on the line and you’d be in the same situation you’re in now.
In this instance the loan will be in the LLC’s name. The LLC is a company like any other company. The loan will be predicated on the income and expenses of the business and the credibility of the management and owners not the credit score of any one of these. This is a non-recourse loan to you. The apartment must be an ongoing concern with employees management and a property manager in order for most banks to consider it. That way if you decided you don’t want to pay the note and the bank takes it back it can run itself while they try to sell it.
justin0419 is right not all banks can do this type of deal. That is why I always talk about dealing with people in this industry not just the normal professional. Remember we ask for things that seem bazaar to the normal world. You need to find someone that has done a deal like this (good or bad credit notwithstanding) where you live and ask who they used and how they structured their deal.
I call the people we need to deal with investor grade professionals. I did something as simple as buy a car a few years back and made the mistake of allowing the dealer to finance the car. The little financial girl came back and said she had to charge me 15% interest. I asked her why and she said I had a bad debt to income ratio. I asked her if she considered my rental income. She didn’t know how to do that I had to go find my financing from my banker that knows to apply 80% of the rent income to my income to adjust my ratios and then I was normal again. Once you get into our industry don’t go back to that world. Don’t go to Chase or Bank of America because you will get some guy sitting in front of a computer that does not have a button to push that will allow him to deal with investors. They will flat mess your finances up.