Me and my friends founded an investment, that have invested in the stock market of just under two years. The returns has been great, but we are now considering shifting some of our investment into real estate (residential rental property). We don’t have a lot of money to buy a hugh property. The goal is to buy one unit at a time. And by the way, we are a registered LLC.
My question is, are there banks out there that could do the mortgage financing in our club’s name, rather than on the individuals name and credit?
I appreciate you advice.
Issue a mortgage to a club? I doubt it, unless you find a small local bank who will do it as long as each and every one of you signs on for personal liability for the debt.
Two years in the market and the group collectively hasn’t made enough profit to pay for a small rental unit? I doubt that a bank is going to see your club as a good risk.
There are "Private Money Lenders" out there who will loan 65 to 70% of FMV as a 1st TD for terms between 2 and 5 years, there interest rate is generally higher than market and they may charge a few points, but the right property at the right price can cash flow and even with the additional cost make a good investment.
Keep in mind a stable housing market will get you better terms and conditions but an unstable market like California, Nevada, Arizona and Florida may cost more interest and points and a lender may only lend 60% or refuse to loan at all.
If you need some resources to call send me a PM with your contact info and number and let me know what state your intending to buy in and I will send you some private money referals to call.
I think as long as you present yourself as a “company” instead of a club you should be fine. Most likely some if not all of the club will have to personal guarantee the note. But as a commercial loan it will not be reflected on your credit report but it will be titled in the name of the business.