Non-recourse and Recourse Loan Parameters

[Jim Froehlich]

BP Members, I've been trying to pinpoint parameters by reading other posts on this subject, but I'm getting conflicting information. I was recently told that I can only get non-recourse loans (residential rentals) for over $1M (generally for portfolio loan). I saw in a post that someone mentioned ability for N/R at as low as $50K. What I'm trying to do with a team of family/friend investors is team up to buy properties cash, but then refinance these rentals within 6 months for 60% cash out. Is that feasible? 2nd question: if placing these properties under LLC that I manage and where 10 people own 10%, if we have to do recourse loan, do ALL 10 people have to give credit, assets, etc.? Can one owner be the "recourse sponsor"? I know there are better financing options if putting properties into S-Corp or C-Corp after buying FNMA rates, but we don't want to be dependent on personal credit for these buys, rather the assets until the overall portfolio is stronger. Thanks for any thoughts/info! Jim

[Josh C.]

Jim Froehlich I think Andrew Postell is confusing some terms. Small loans, especially one loan on one property are almost certainly recourse. Recourse meaning you are personally guaranteeing them. As you mentioned earlier large loan amounts can be non-recourse.

However, why does that matter? Don’t buy junk and have cash reserves. You should be confident enough to put your money where your mouth is. If partners don’t want the liability you guys could always do joint ventures and they wouldn’t get equity. I have several commercial loans with partners. Everyone on title always personally guarantees the paper. My opinion/experience anyway. But if you keep calling banks one might be desperate to offer that, but not the norm.

Good luck!