Multifamily Loans for International Investor

[Pedro Adolfo Garcia]

Hi BP members! I'm from Mexico and I've been studying recently about multifamily investment in the US, I'm planning to raise a friends and family fund in the next year and I would like to know if it is possible to get a loan for a commercial multifamily project creating an LLC or what would be the best way to do it.

I'll appreciate a lot your comments.

[John Corey]

Pedro,

1. Check the laws in your country. I sort of doubt Mexico is much of an issue. Some other countries do have restrictions. Check the facts.

2. You need to understand the tax regulations on both sides of the boarder. While standard advice for USA investors is to create and use an LLC, it could be a very bad idea. A pass through tax vehicle like an LLC could create issues in the USA or in Mexico. It comes down to how one country will tax the income and then how the home country deals with it. Some deductions allowed by the USA will not be allowed by another country. So, you need to figure out how the two tax regimes line up before knowing the optimal set up or entity to use.

3. The lending advice is a bit off. Individuals borrowing in their own name will need a credit file in the USA. You would like need a USA income and address. If you were buying a major commercial property, the lender looks a lot less, if at all, at the personal credit of the person who owns the company. It is more about the income stream from the asset. So, there will be some strategies closed to you unless you are a cash buyer. And there will be some strategies which are open to you even though you are not really showing up is the USA credit bureaus. 

You also can look at seller financing for some of all of what you need. If an institutional lender is happy at 50% LTV to a foreign national and the seller will supply another chunk of the debt (for example, 30% 2nd), you might end up in a fine situation for financing.

4. You will need to deal with AML (anti-money laundering) and other verifications. The lenders want to know who you are, where the money came from, etc. Standard practice these days in all advanced countries. Depending on your background, there could be other questions. Having a family member who is an elected official can subject you to extra AML checks. If you were from a specific country that is on a watch list, then expect more of the same.

I invest in the USA and UK. I have lived some of the issues you will bump into. You can crack the code if you want to put in the effort. Good luck. Stay in touch.