How can my real estate investment/development company access nonrecourse loans?

[Danielle McKahn]

Hello! I have a small real estate development/construction/investment company with four partners. We've been honing in on a pretty good development/investment formula that is working for us where we buy an existing single or multi-family house that can be improved or easily split into smaller units, and then we also add small new construction units to the property (townhomes or duplexes or cottages) and, generally, we rent them all out (though we have sold a couple of single family rehabs and we may sell the units in our next big project... TBD).

We have a few projects under our belt that we also own/manage at this point...we completed an 8 unit project (all rented) and we completed a 5 unit project (all rented) and we are in-process on a 9-unit project and have a larger one in the hopper (maybe 18 small units that will be sold, currently has two units rented). 

So far, our local bank that has financed all these projects has required personal guarantees of all four of the partners. But, my partners have asked me to figure out when and how we could be able to access nonrecourse loans against just the company collateral instead... It's been a bit of a dead end asking this question of our current banking partner... I'm starting a conversation with another local bank but I have a feeling it won't go anywhere. What do we need to do to get to the point that we don't need to personally guarantee each property/project loan? Is this is a size thing (company just needs to get bigger/have more equity), or perhaps a business structure issue, or should I be looking at different financing sources other than local banks? If we DO find nonrecourse loans, I assume the interest rates are higher (how much higher should we expect)? Thank you in advance for your help! Dani

[Jay Hinrichs]

Quote from @Ned Carey:

@Danielle McKahn this can be done, there are people who do it. However it is not typical or common. 

I don't know who to look for but I would ask, "Why?"  I am not afraid of non recourse loans because I know the deals I do are solid and I am not concerned about failing. If you feel the need for non-recourse, could it be the deals you are doing are not as safe as they should be?

My onlyl tip is check out self directed IRA discusions here. (SDIRA) An IRA cannot must use a non-recouse loan so they are often talked about in self directed IRAs IRA forums.

under the scenerio presented there is no way a bank will do non recourse.. just wont happen. what you can do is rearrange your LLC.. were only on person PG's  the other members each hold less than 20% interest thats the threshold for PG for most all community banks.
and you do the PG.. keep in mind LLC's can have uneven ownership and un even profit splits you can have an llc that you own 90% of but you only make 10% of the net profit its not like coroporations were ownership % also equals profit distributions.  this is how I do my deals I am the only PG all my partners never PG even though some make more profit than I do..