LLC receive a loan to fund a down payment?

[Brandt Welch]

Hello BP,

My partners and I are equal owners in an LLC that we intend to use for real estate investing and we're thinking of creative ways of financing a property. An idea we had was to seek out a portfolio loan from a community lender. My understanding is that we would typically be expected to pay somewhere between 20-25% down on a property in this case. We were then thinking of finding another lender to fund a portion of the down payment.

Does this approach sound like it would make sense? Would portfolio lenders not like to see a down payment partially financed by some third party? How difficult would it be to find a lender to help finance a down payment?

Thanks in advance!

[Jason Wray]

Brandt,

The majority of banks/lenders is not going to allow for the down payment to come from a loan. There may be a slight chance where they can ask for the "terms and conditions" of that loan to add the payment and calculate the proposed DTI. But again in the majority of the cases the lender wants to see "Liquid reserves" from one or multiple partners to cover the PITI monthly reserve requirements in order to be approved. These are questions you need to talk to the bank/lender or your broker about prior to application and credit.

This is one of those reason why most loans get denied because this is really creative financing and high risk.  Which after you have paid for an appraisal and invested a couple of months submitting and chasing down documents can be painful when the UW sends out the suspension or denial.  If this was a bridge loan where they were using the equity or collateral of another property it may work but not a loan for a loan.