Financing options through a Trust

[Haley M.]

Hi everyone! I have a question regarding financing options, my apologies if this has been answered somewhere, but I haven't been able to find an answer for it. On the advice of my attorney, I am considering purchasing my buy-and-hold properties through trusts, rather than through individual LLCs like other investors in this area do. I know that I would need to get a commercial loan to buy through an LLC, but what about a trust? I am located in Massachusetts, as are my target properties, and have not yet figured out exactly what type of trust to use. In an ideal world, I'd like to get conventional mortgages because of the better financing terms. Is this possible with a trust? And if so, does anyone have any lender recommendations that would do this? Thanks!

[Mark Elkins]

@Jay Hinrichs   Just look for any lender who doesn't need your personal credit or guarantee to lend on the asset value.  I would look in Scotsman Guide to find the lenders that your broker/originator doesn't know about.  Otherwise, search the internet and ask other investors.

Now, please forgive my rant:

There was a time when I was told that these loans didn't exist and I believed it but, consider this, investments in your retirement account are FORBIDDEN to use recourse funding. The requirement for protection is obvious, the government can't allow people to speculate in real estate or other leveraged assets in any way that would jeopardize their IRA's to be attached for more than is borrowed or it would void the protection afforded to those types of accounts.

If IRA's can purchase property with lending that MUST be non-recourse than, non-recourse loans are available. If there is a party willing to invest in this type of leverage instrument, why would they limit themselves to only lending to retirement accounts?

I think the biggest problem with finding these types of lenders is starting to believe the ignorant and the arrogant deniers of the existence of these loans.  I'm not saying stupid, just ignorant of the facts.  What I think happens is that the largest employers hire and train the largest number of brokers and originators and they don't want them to sell non-recourse products so they don't teach them that they exist.  Not knowing, these people don't know that they don't know these loans are indeed available and they never look or try to get them.  When someone inquires because they read a comment like this one or in a real estate investing class, these broker/originators just tell them that these loans don't exist and never check their own presumptions.

Another myth that harms investors is that there is no such thing as commercial credit or you always have to sing personally for credit.  Really?  Do you think that Mark Zuckerburg needs to run down and sign the application or swipe his personal credit card every time one of his departments needs a new batch of laptop computers from CDW?  No! of course not.  It is also true that you or any small investor can get a non-recourse commercial line of credit provided you know how to shop for it.  I drive a Ford.  Not because Ford is my favorite brand, I drive Ford because Ford didn't ask for my social security number, bank statement or tax return when they lent me the money to buy the car.  Even the dealer had no idea that Ford Motor Credit would be willing to lend me the money with no credit check based on the credit of my company!

Here are some others, most folks know, you can get a mortgage 1 day after the discharge of bankruptcy chapter 7.  What they don't know is that in Chapter 13 or Chapter 11 you can get mortgages and loans WHILE THE BANKRUPTCY IS ACTIVE AND OPEN.  In many cases, you don't even need the permission of the court.

There are plenty of things you don't know.  If you think something is or should be possible, keep asking even after you are told no a few times.  My father was fond of telling me that "If you're not getting the answer you want, it's because you are asking the wrong question!"

@Chris Mason Thanks for the Fannie 30YF info, I'll check it out.

I hope this helps!

Holler if you need me.

Best regards,

Mark