My partners and I have recently acquired a property and are looking for more in the Phoenix area. We have a hard money lender that we’re working with.
According to the lender we shouldn’t have any problems getting a second property, after that we may have some difficulty due to liquidity. We’re looking for longer term financing to replace the hard money, once the properties are rehabbed. LTVs should be about 80-90% on the long term financing, we’re shooting for 80%.
We have an LLC which we would like to use, to avoid having all the loans on our personal credit reports. Anyone have a recommendation for finding a lender willing to loan to a newly established LLC?
You noted that WAMU did LLC financing? Will you please clarify if you meant that they also did the loan in the LLC name too or just title.
A loan made to your llc would be a commercial loan. Local banks where the property is located will be your best source for these. You may have to search for a while but this would be possible. 80-90% would be a strech, 75% more than likely is what you’ll find available.
Your post doesnt mention if the new loan at 80-90% is cash out or just paying off the HML. If just paying off the HML then you may want to reconsider the porperties you’re working with as you’re likely into them too high. Typically properties purchased below market value before rehab are bought at 40-50%. Those can either be wholesaled out or rehabbed but usually when finished would have an ltv at ~65-75%.
I do know of one national commercial lender that does refinances on investment properties. Max ltv is 75% and you must have owned the property for 12 months on both cash out and rate/term refinances.
You may want to consider using conventional loans to purchase properties, hold for a bit, then refi using a simiar program or even explore a blanket loan covering 5 or more properties.
Also keep in mind that any type of commercial loan will have higher rates, shorter terms, and much lower closing cost.
I guess I wasn’t clear. Let me give a more concrete example.
The property we’re working on right now has ARV of $185K, we have $154K including down payment and hard money loan in the property. The rehab is scheduled to complete in 3 weeks or less. I would like to refinance with a long term loan of about $154K which would give us back our down payment and pay off the hard money lender. According to my calculation that is 83% LTV, which is why I said 80-90%.
Are there loan programs that will allow us to accomplish this goal? Are there lenders in the current environment that will loan to investors at 83% LTV?
Yes, normal conventional full doc loan up to 85% for sfr. Can have no more than 10 financed properties. PMI if over 80%.
Stated or no ratio can be done up to 80-90% but requires a 720 for sfr. No more than 5 investment properties. Falling outside of those parameters possible for other reduce doc loans at 75% cash out. Higher ltv if you only want to payoff HML with no additional cash back.
This doesnt address having the loan made in the business name though. There a couple wholesale lenders that can title in the llc but not the loan. That requires a commercial loan which you’d be best speaking to local banks. 85% cash out is probably too high for them.
Can you translate this for me please? “Stated or no ratio can be done”
My FICO is 800+ so qualifying personally isn’t a problem. Want to keep the FICO up. So I would like to get the loans out of my name and into the LLC. I can even leave some equity in place, but it reduces the amount I have to do the next deal.
“Stated” stands for “stated income” (stated comes in various forms–SISA for stated income/stated assets or SIVA for stated income/verified assets) and “no ratio” is a loan program that doesn’t take your personal DTI into account.
Not mentioned in the thread but of significant importance, is the presence of cash reserves (as in you need to have them—6 mos. is the norm).
Wholesale lenders that make conventional and portfolio loans DO NOT make loans to business. However, a select few may allow for title to be vested in the business name. Remember though that this does not get the loan out of your personal name. So if you want it set up like that you have to get a commercial loan. This can either be individual through local banks or blanket loans offered by local banks and/or commercial lenders.
Your score is high enough to meet the parameters of a stated income or no ratio loan. But these are for conventional loans which will not be in the business name.
Does that answer your question or were you asking what a stated or no ratio loan is?
Ok, I understand that “conventional” lenders (those that resell in the secondary markets) don’t loan to fictitious entities like LLCs and trusts. I have a trust and when I get a new loan on my home, I have to take it out of the trust, and then put it back after the loan. That’s not what I’m looking to do.
I also know that loans on my personal account will pull my FICO score down because my DTI will get to high and limit my ability to acquire properties. So I’m trying to create a strategy where the properties are financed in our LLC, affecting the FICO score of our LLC not my personal credit.
So, if I understand what you are saying, commercial loans or private lending are the only avenues to use to accomplish these goals.