Financing/ Banking Questions

[Adrianna Pisano]

My partner and I are eager to purchase our first multifamily rental property. We created an LLC and are currently exploring potential lenders. However, we are facing a dilemma regarding the financing options. On paper, our financial standing looks great, and we have an existing relationship with Bank of America through another business account (not real estate related). Our preference is to obtain a loan that is as close as possible to a conventional mortgage, with a 30-year fixed rate and no prepayment penalty etc etc. What's your experience with Bank Of America? We aren't sure if they're the best option for real estate loans. In the long term, should we focus on building a relationship and securing most of our financing through a large bank like Bank of America OR a local credit union, OR should we consider exploring other options with different lenders? Whats worked best for you, and where have you found the lowest rates? 

Some people have suggested purchasing the property in our personal names and then transferring it to the LLC, but we've heard this process involves some risks. For our first deal, would it be best to buy the property in our personal names and then transfer it to the newly formed LLC? Considering that the LLC has no financial history or income as it's entirely new, we aren't even sure if we'd get approved for a loan in the first place. There is a ton of information out there, and we've done a lot of research, but it's making it that much harder to make a decision! We know this will be a learning experience, but we want to make informed decisions along the way and set ourselves up for long-term growth and success. If you can help answer some of these questions or provide any insight at all, it would be so appreciated! Thank you!

[Adrianna Pisano]

Quote from @Greg Downey:

@Adrianna Pisano, there is a lot to unpack in your post and much that you'll just need to decide on your own. On thing that might be helpful is the idea of business credit. I see this posted all over the place on here and other places. In my opinion, "business credit" is WAY overblown. Yes, a loan CAN be made TO your business entity (not using conventional financing) BUT the primary security is NOT the business it is the real estate AND the personal guarantee. 

In my world (DSCR lending), we actually create brand-new entities much of the time.

As @Chris Seveney rightly identified, pricing for DSCR loans are a bit higher, typically ~0.5% or so, but fees might actually be lower in some cases.

Just some food for thought to help narrow the things you are focusing on. 

@Chris Seveneyundefined

@Greg Downey I've learned A LOT since this post and decided to use a local credit union for banking (given were still in the early stages, I don't think where we bank will have much of an impact) We've been exploring DSCR loans, working with investor friendly lenders, steering away from BofA. I totally see now that this is more of a personal decision. I'd like to keep your contact info for future reference. Thanks for the added insights, very helpful!!