I’m at a point where I have questions about different finance techniques and the best options for my particular situation. I don’t want to get in a situation where I financed poorly for tax reasons or for interest/down payment reasons, etc… I just need some general guidance
I have a sole proprietorship started in July 2007 with no credit or history. I assume I will NEED to do my contracts and financing in MY OWN NAME AND NOT MY BUSINESS NAME?
ULTIMATELY, my goal is to quit my day job and do investing full time, BUT I understand that to do this banks/lenders need to see good history/credit of an established business (2+ years??) before they will loan to an investor with no income other than REI investing?
So, my overall question is how should I be structuring my business and deals (wholesaling, buy and hold, light rehabbing, short sales for now) so that I can start building these things for the future? I don’t want to get to a point 2 years down the road when I’m an established business only to find out that I should have started something (such as building credit, starting an LLC to build credit, etc) correctly NOW! Any advice here would be great!!
I’m working my tail off right now to get things going, but I feel this is somewhat of a roadblock until I can figure out how to structure my business the right way for the future.
Welcome to REICLUB. My first piece of advice for you is to start reading these forums. Pick whatever type of rei you are interested in and start reading. My second piece of advice to you is don’t quit your day job anytime soon. And I say that only because as a lender I know how important solid income is to an application. :smile Good luck and happy investing.
This is what I did, take from it what you want. I set up an LLC to purchase my properties under. Before I had that business established for a couple of years the lenders always went off my income from my job + 75% of the gross rents from the property that I was purchasing. If it worked out, no problem. My lenders simply put it in my business name and I personally guaranteed the note. I just told them I wanted to start acquiring properties in my business name so that a couple years down the road it would be an established entity, as long as you personally guarantee the note it really makes no difference to the bank.
As far as I know my company doesn’t have any credit score or anything like that. I don’t have a DUNS # or anything along those line. When I take a deal to the bank they look at the deal first. Can the property(s) stand on their own? If not, and they always should, then they look at the borrower (you/I) as a secondary source of income. They’ve told me that they look at the borrowers credit score just to make sure it’s at least above 620-640 or so but that has little to do with the actual decision to fund or not. That decision is more driven by LTV and DSCR guidelines.
I have never done any wholesaling or short sales or anything along those lines. I buy and hold, and that was how I started everything. I found a first deal and made sure it fit into the guidelines of what the bank was looking for and went from there. Good luck!
So the banks WOULD allow you to put your deals under you UNESTABLISHED LLC entity without having history as long as you personally guaranteed the note??
I’m just asking because I was told by a local investor to put my deals under my OWN name until I got my business established otherwise the loans wouldn’t get approved. How should I be putting my deals on contract, in my business name or real name? Also, if it makes a difference I’m not on an LLC yet…
Ballgum,
I think you need to ask your local banks. Get a business plan together along with your personal info. The banks will tell you what they do/don’t require. Good luck.
So the banks WOULD allow you to put your deals under you UNESTABLISHED LLC entity without having history as long as you personally guaranteed the note??
Yes. The bank should actually encourage this because it adds a level of liability protection for you.
I was told by a local investor to put my deals under my OWN name until I got my business established otherwise the loans wouldn't get approved.
He/She doesn’t know what they are talking about, sorry. Local banks buddy. Even if you don’t bank there, talk to them about your deals. It’s the large national banks that are cramping down on their lending guidelines. Small local or regional banks are doing much better because they don’t have the level of exposure to the bad loans like the WaMu, Chase, B of A, Wells Fargo, etc…
How should I be putting my deals on contract, in my business name or real name?
I always put both my business name and my name along with “and/or assigns”.
Also, if it makes a difference I'm not on an LLC yet...
Form one, it’s simple. It’s not some bulletproof shield that protects you from all liability. But if you are serious about starting a RE business you should probably start with a licensed business name. Remember this is a business not a hobby. Good luck!
Yes you can IF the name has not been registered as a corporation or LLC by someone else in the state. The only way to find out is to contact the government entity that registers business names (Sec of State in TX).
Ok thank you. I remember awhile back someone told me I either can’t get my LLC in same name as my DBA or I shouldn’t for some reason? Is there any reasons why I shouldn’t (for taxes or anything else)? I just want to make sure before I go spend the money and do it.
You are asking some very good questions, but as Wilson said you really need to sit down with an Attorney and/or an Accountant and make sure that you are getting correct information. You can get great ADVICE hear on reiclub, but when you really need to have the correct information in regards to taxes and legal issues I would suggest spending the money and talking to professional.