I'm incorp'ed, trouble finding lender - Posted by Shari Brown

Posted by Julia on July 12, 2001 at 16:28:40:

I am in Passaic Co.

Julia
arwen@bellatlantic.net

I’m incorp’ed, trouble finding lender - Posted by Shari Brown

Posted by Shari Brown on July 03, 2001 at 17:13:23:

Anyone have any suggestions on how to attract a lender? I’ve incorporated my business and am looking to buy first rental, a single family home which will have about $120/mo positive cash flow. My corporation has no credit rating as it is new and has cash assets only so the traditional paths are not interested. Also, I’ve been told that mortgage companies now do not lend 80% of appraised value, it’s 80% of purchase price. Know any sources I can contact? I’m in Central Florida if location matters.

Re: I’m incorp’ed, trouble finding lender - Posted by Nick

Posted by Nick on July 10, 2001 at 21:49:41:

Shari -

I have had the same problems, we are an LLC. 80% ltv is the best we have found, however, today I talked to a bank about a line of credit. This particular local NJ bank will run a line of credit up to 80% of a solid asset (collateral). Of course you will have to sign personal guarantees. If you have equity in your own home or another home that you plan on keeping for a while, you can use that as collateral. The bank, in this case will give you a check book for the credit line to purchase properties. The rates are up around 9% on the line of credit. The good part is once you find a place, you can put work into it, and the same bank will roll the property into a mortgage, in the LLC name. The goal is to find a property in which 80% ltv will be enough to pay off the line of credit used to purchase the property. Then, according to the banker I spoke to, the only time you will need money out of your pocket is to cover the remaining amount to pay back the line of credit that the mortgage does not cover.

I have not done this, however I will be researching this more and am planning to do this for our next property. With many things in this business, the concept sounds great, I am only hoping that the execution of this strategy works out.

Keep in touch and I will let you know how it goes for me.

Best,
Nick

Re: I’m incorp’ed, trouble finding lender - Posted by Carlos

Posted by Carlos on July 08, 2001 at 16:03:21:

Just had this same issue in NJ. Please note, I’m new to the game and this may not be the best answer, ED? My solution was to buy it on my own, outside the LLC I created because it was only 10% down, super low PMI, 7.5% interst and $400 positive cashflow a month. The reason I became an LLC (which may be a better vehicle for you instead of the C corp or S corp - for another day) was to get limited liability protection (tax wise it makes no difference). So, I gave up that protection but compensated by getting additional insurance coverage ($200/year for $1M). Let me know what all of you think.

Carlos

Re: I’m incorp’ed, trouble finding lender - Posted by Carey_PA

Posted by Carey_PA on July 04, 2001 at 22:57:33:

Shari,

Try local small banks in your area. (commercial department)

The ones in my area lend 75%-80% of appraised value.

You can get the loan in your corps name but you’ll have to give a personal guarantee for now.

CAREY

Re: I’m incorp’ed, trouble finding lender - Posted by JohnBoy

Posted by JohnBoy on July 03, 2001 at 17:54:59:

It’s 80% of the purchase price OR 80% of the appraisal, which ever is LOWER.

A new corp. with no credit will be unlikely to get financing. You will have to personally guarantee the loan.

Re: I’m incorp’ed, trouble finding lender - Posted by Carlos

Posted by Carlos on July 11, 2001 at 10:09:34:

Hi Nick - saw both your posts, here and under New Jersey Real estate, I’m in the process of putting all the NJ folks into a distribution list and sending out a more efficient email.

In the meantime, I noticed the immediate post and was wondering If you and I can talk off-line about the approach you took with the bank. I’m about to start approaching banks for a LOC (Line of Credit) and would like to learn successful strategies. Did you have to do much convincing?

Anyway, please feel free to email me.

thank you,

Carlos

Re: I’m incorp’ed, trouble finding lender - Posted by Shari Brown

Posted by Shari Brown on July 11, 2001 at 17:47:55:

I have found a small local bank who is willing to work with me. They will process my single family home purchases through the residential side of the bank instead of commercial. Since I am an S-corp, they feel it all flows down to my personal income anyway. I tried many small banks but this was the only one I found willing to work with me. They have a reputation of supporting small business. I think that is the key. They also mentioned a line of credit for future considerations. The loan officer’s brother is a local lawyer so I am hoping this relationship blossoms into estate and foreclosure leads too!

Re: I’m incorp’ed, trouble finding lender - Posted by Shari Brown

Posted by Shari Brown on July 05, 2001 at 17:16:12:

Thanks for your help. So far I’ve only found one bank that will even talk to me and they will do 70% of purchase price (not appraisal) and there can be no second mortgages. Have about 30 more banks and mortgage companies to call, though! Your message gives me hope…

Re: I’m incorp’ed, trouble finding lender - Posted by Shari Brown

Posted by Shari Brown on July 05, 2001 at 17:19:39:

Thanks for responding. I don’t mind a personal guarantee as I have excellent personal credit and a good paying job. I’m trying to find ways not to put up the 20% in cash but for my first few properties, I may have to, huh?