Loans options for starting out in rei

[Nana Nkoah]

Hello fellow BP members,

I'm at a place where i'm interested in buying my first multifamily rental property (preferably a triplex or a quadruplex). 

I've done some research about obtaining recourse loans, non-recourse loans and full recourse loans.

Based on my research, here are some options i've thought about

1. I found out that that recourse loans are the easiest to get. However, my worry is that i my tenants or anybody can come after my personal assets if anything goes wrong. Does anybody have any strategies i can use to help mitigate those risks?

2. Most non recourse loans are available only to investors in the commercial space and also require an LTV of like 50 or 55. Also, requires a huge downpayment and have high interest rates.

3. I also found another way which is first buy property in my name (so means i can get a conventional loan or FHA loan), transfer to a land trust and then transfer the land trust to an LLC. Has anyone tried and tested this approach? Will i have difficulty in refinancing or securing a loan in the future?

4. Just form an LLC and look for a loan because my personal assets will be protected. However, i hear its difficult to secure loans for a first time buyer and even if secured the interest rates are high.

Can someone with experience in REI help a beginner out?

Thanks in advance

@Clay Smith

[Kerry Baird]

Fannie Mae changed guidelines on this:

From this site: Transfer to LLC

To take advantage of this new leniency, there are some rules to follow:

Your mortgage must have been purchased or securitized by Fannie Mae on or after June 1, 2016. You can look up whether your loan is owned by Fannie Mae and when it was purchased on this handy site.

The LLC must be controlled by the original borrower on the loan or the original borrower must own a majority interest in the LLC.

And if the title transfer happens as you convert a residence (primary or secondary) to a rental, the timing can’t violate any other terms of your loan (for example the requirement to live in a property for 12 months after buying it as a primary residence).

And your servicer will be required to notify you that you’ll be required to transfer title back to your own name before refinancing it in the future.