LLC & Commercial Loan

[Brian Garrett]

I've read how people create an LLC for their REI adventures and secure commercial loans versus getting conventional loans under their personal names. To my understanding the commercial loans closer quicker and are an easier process overall with an average interest rate of about 5%. My question is can I set up a new LLC and still secure a commercial loan or does the LLC have to already have a proven track record and established credit history? It seems that I can't go the conventional loan route under my personal name because I have no W2 income since I was self employed for the last 10 years and I have been transitioning out of those business endeavors for the last 2 years therefore I have no real income to show. If I can't go the LLC and commercial loan route then what are my options? I guess it would have to be either cash buys, HML's or private money at that point? 

Also can I still do a cash out refinance on a property that's owned through an LLC? For example if I want to utilize the BRRRR strategy I will eventually need to pull out cash to reinvest.

I appreciate your input and advice. Thanks in advance!

[Alex Bekeza]

@Mallory Thompson In general, commercial loans have no DTI requirements, no limit on the # of financed properties that you own, and generally take a very subject property based approach to underwriting. They'll allow LLC vesting as well. Regarding cash out, right now the highest I'm seeing is 70% LTV once the borrower has been on title for at least 6 months. (post covid restriction) Pre Covid we were seeing 75% cash out,90 days seasoning, 30 year fixed terms in the 5s all day. Nowadays, those same 30 year fixed terms likely come back at par in the 6s with options to buy down into the 5s. (typically worth it since lately all of the break evens I'm seeing on those buy downs are like 2-3 years). I think rates and max cash out LTV will continue to be a moving target as we ride out of all this market uncertainty. Feel free to reach out with questions anytime.