Finding the right lender, LLC or Single Borrower?

[Dominick Colello]

Hi everyone, I should start this by introducing myself, my name is Dominick. I’m 22 years old and just recently graduated from SUNY Albany. After years of living in student housing, both on- campus and off-campus, my two roommates and I became very interested in the real estate market around us. After reading a few of Brandon Turners books, I instantly became fascinated with the idea of not having to work behind a desk my whole life, that I can actually be “financially free”. After a few months of research and iPhone calculator breakdowns, I realized it could actually be a reality. Fast forward a year to present day: My two roommates now work in finance banking in Manhattan, about 2 1/2 hours away and I am the guy on the ground in Albany. They both have a starting salary of 80k with great credit and no major bills. Myself on the other hand, I’m a bartender who claims a little over 40k a year with average credit and on paper, a very high debt to income ratio. We have a fully established LLC, a banking account, a few good agents, and a good contractor. My partners are in finance so they handle that stuff and I’m the current property manager. Homes in our target area are priced from 100-200k , all depending on quality of the home. Mostly all 6 bedroom 2-family units. The lower quality homes can bring in $400 a bedroom and the higher priced homes attract graduate students and go for up to $550 a bedroom. I know all the risks of renting to students, especially with older homes and we have created a business model that accounts for that. The local landlords also charge insanely high security, (we paid $4,200 in the house I lived in). Now that you guys now everything about me, we can get to the actual reason I’m posting. Getting a loan, the only thing stopping us from purchasing our first home Is qualifying for a loan. Do we go through our LLC and pay a high down payment? Do I attempt to qualify for a FHA loan by myself with my low credentials? My partners are not able move up to Albany for at-least 5 years, so they can’t get an FHA loan. When approaching a lender, what are the top items that I must have with me in order to better my chances of getting approved? Thanks everyone! I appreciate all feedback

[Nate Monson]

Hi @Dominick Colello I also attended SUNY Albany and now work as a Real Estate Agent in the area! I would say starting out you probably are going to want some reserves for the “just in case” scenario. If you are able to live in the property for the time that would be advantageous especially if it is a 3-4 unit to get an FHA loan. If that’s something you aren’t interested in, I would then look at your options through the commercial route. You could certainly go to a bank and most likely qualify for a loan which would be fine. It just may take you a little while longer to scale. The other option for you could be to look for a minor rehab. As a bartender it seemed like you could have time to manage rehabs during the day. Whether you do the work yourself or hire a contractor would be up to your comfort level with repairs. With this strategy you would still be in the 20-25% down range, but you would be able to walk away with more equity and not have to live there. Then after refinancing you should be able to pull some of that equity out to be able to do it again, and again. If you ever have any questions feel free send me a message! Would love to connect as two Ualbany folks!