Cash or Assets Required for an Asset-Based Loan

[John Hamilton]

Say you want to invest and buy a $50,000 house.

You have no income.

You put together Other Peoples' Money, structured through an LLC, with the goal of getting an asset-based loan for this $50,000 house.

Maybe you want to put e.g. 25% down, etc. on this property, but hoping not to have to pay all cash for it.

Generally speaking, how much assets or cash would this LLC have to have jn order to get a bank to write a loan for this $50,000 house?

For example.....

25% down = $12,500
[u]Then what sort of cash reserves/assets would a bank want to see in order to secure this loan?

$50,000 in cash/assets because that's the value of the house?
$37,500 in cash/assets because that's the remaining mortgage?
$100,000 in cash/assets because that covers collateral for the house and some wiggle room?
Is there a general asset-to-debt ratio that a bank would look at to write an asset-based mortgage???

Thank you!!!

[Jon Holdman]

Banks aren't going to touch this loan. Banks will only consider the income from rentals once you're experienced. That's generally considered to mean you need to have two years tax returns showing income from rentals. So, getting started really means you must have income from some other source that you can use for the qualification process.

So, you're really looking at private money (i.e., from someone you personally know) or hard money. Or, use your cash to start the ball rolling. Buy a house or two, get them on your taxes and then banks may look at that income. But even then you're in a stated income loan sort of situation. Lenders really want to see that you have an income stream that will allow you to pay the mortgage even if your property sits vacant.