Peculiar Situation, Have Properties but can't refi or buy more?

Question

So in trying to figure out the best course of action on this, figured we would turn to the geniuses on this forum.

Have been investing for 15 years, mainly single families and about four years ago purchased a 26 unit building that is doing great and definitely has some equity in it now. Buildings are 100% occupied, NOI of $50k per year (with debt service) and current loans are $429k (at 5.5%) with appraisal value of $700k+.

So we have an entire plan in place for the future, meaning what "success" looks like to us from a yearly Net income standpoint. With this in mind, we either sell these units and look at a good 100+ unit or keep acquiring aside this one. Here's the issue, need to find private investors or people who can help get financing done correctly. Why?

Well, I owned a business for many years, was screwed over horribly by a partner two years ago and chased after by a nasty, nasty local bank who forced me personally into BK (have lawyers letters to back this up). Had a 800+ credit score before that and all bills paid on time, etc and have paid all bills on time after that. So at this point, my credit score is back to 715+ and my wife's is 780 (she didn't file bk). So no conventional lender is going to look at me period, plus I am not totally stoked about putting down another huge chunk of cash. I do real estate 80% of my time currently and am very familiar with running properties and real estate in general (just background info).

So the properties are there with the equity, cash flow excellent for three years, but can't seem to find someone or someplace that will partner or help finance deals going forward.

Ask any questions you have, more than happy to answer and hopefully this makes sense.

Thank you

David Dachtera · Answer

@Christian Beebe,Sounds like you need to set up an entity or two or ... and set up credit for them since yours is trashed.You'll want to get your properties into an entity structure so the BK thing - or anything else - can't happen again.Then, do everything in entities going forward.Remember: control everything, own nothing.Here's a diagram of what it should look like:Set up a revocable trust with you as the beneficiary. It will then become the owner of your personal residence, the beneficiary of your life insurance, etc. It also is the first owner of your S-Corp and your LLC(s). The S-Corp becomes the second owner of each LLC (for multi-member protection). The LLCs are each part owner of your S-Corp. Set a limit for the amount of property value in each LLC so you don't "have all your eggs in one basket". Everything "the other side of" the trust is owned only by other entities - no human persons. So, your personal liability is extremely limited. Remember to properly insure everything, also.My group's tax and legal expert was here for a Saturday workshop last month and drew that on the overhead projector. He's a JD/CPA Tax Attorney / Tax Accountant.

Salvatore Lentini · Answer

Hi @Christian Beebe - I have a lender that lends based on the property not you. They can do a refi at 75LTV. Their rates are higher than traditional banks but lower than private and hard money. As long as you have a 650+ credit score and the property numbers look good, you're good to go. Message me if you're interested.

Marc C. · Answer

There are now several hedge-fund lenders specializing in lending to stabilized rental property owners based on the asset value and peformance. You haven't spent enough time on Google yet. Expect 6.5% interest and 75% LTV, but 30 years. http://www.b2rfinance.com/https://www.colonyamericanfinance.comshould get you started.

Julie L. · Answer

Salvatore Lentini please pm me with info re lending. Thanks.

David Dachtera · Answer

@Christian Beebe,Corporate credit without personal guarantees is a whole specialty unto itself, and not my specific expertise, though I do have a potential resource.The short version is that the entity(-ies) need to have a strong enough credit history that they can stand on their own without someone needing to back them up.Send me a colleague request and we can discuss this off-forum. I'll collect my info so I can be prepared to converse intelligently.

Christian Beebe · Answer

Stephanie Potter, wrote you back but have not heard anything.Christian

Stephanie P. · Answer

@Christian BeebePlease accept my colleague request with contact info. I will have my guy in the mid west call you. Stephanie

Christian Beebe · Answer

David, appreciate the response. All the properties are in llc's from the beginning (ie last four years) and owned by an S corp. But even with this being said, every lender so far only cares about my information, not the companies so I would to understand exactly how you get that mentality to switch.