All Forum Posts by: Jeremy Bohnett

Hi all - My business partner and I are looking for an Arkansas based attorney who specializes in real estate. 

Any recommendations?

Best,

Jeremy

@Michael Neiman First of all, congrats on jumping in! I too started an LLC with a buddy about 6 months ago and we just locked in our 4th house. My advice: buy a house. You won't be able to stop at one.

The challenge you are describing is one that we faced as well. With 5 of you, your best option will be to secure a loan through the LLC.

We called around until we found a local bank who would do 80% ARV loans. Most lenders said 80% ARV or 80% loan-to-cost, whichever is lower. That is not ideal if you're looking to BRRRR as it means that no matter how good of a deal you find, you're always going to need to put 20% down.

Here is how it works with our lender. We get a property under contract, get an inspection, draft up a repair list with associated costs and submit to lender, he then gives that list to the appraiser. The appraiser then takes that list and appraises the house based on what it would be worth once those repairs are made. That number is our ARV and the lender will give us a loan to our LLC for 80% of that number. So, the formula for us when we look for properties is simple: purchase price + rehab must equal 80% or less than ARV. Another rule of thumb of ours is that the property must rent for over 1% (ideally 1.5%) of ARV or else we're underwater.

Current terms are 6% interest, 20 year am, 5 year balloon. Additionally, the loan is interest only for the first 6 months. We are going to revisit these terms for future properties b/c margins are slim on anything under 1.5% purchase price to rent. However, it's really nice to be able to buy several properties with little money.

My advice would be to search the BP forums for others doing BRRRR's in your area. Send them all private messages asking for a BRRRR friendly lender they recommend. That's how we found ours. Wish you the best! Let me know if you have any questions.

Thanks to a fellow BP member, I think I found my lender. Here we go:

"To summarize our conversation I would like to see 10% of cost into the first deal or two. Assuming we are at 80% LTV or better based on the "as completed" value of the property after improvements. After we have a couple under our belt and I have a chance to see how you guys operate we can look at moving to less cash down and base it off of LTV solely. Approximate terms are as follows:

80% LTV of appraised "as completed" value

6.0% interest rate

6-9 months of interest only period to make improvements and lease property

Converted to P&I payments for total of 60 month balloon based on 240 month amortization“

@Chris Heeren Following up with you five years later and 1 podcast appearance later. What did you do?

Thanks @Heath Ryans @Jared McCullough and @Jaysen Medhurst! 

Jared, what type of loan are you obtaining? Commercial or a loan from credit union similar to what Jaysen is referencing?

And in regards to the credit union route, has anyone heard of credit unions loaning to LLC's?

Thanks @Heath Ryans @Jaysen Medhurst and @Jaron Walling. 

The lenders I've been speaking with are commercial lenders who lend to LLC's. 6.5%ish interest rate. 10-20 year ammortization with a 3-5 yr balloon. It's clear they don't do an INITIAL loan based solely on LTV because they want me to have at least some cash in.

Is the strategy to take this loan, stabilize the property (rehab and rent), and then find another lender who will allow me to full cash out refi based on LTV solely? Assuming purchase price+rehab = 75% or less of appraised value.

Hi everyone,

My understanding of the BRRRR method doesn't seem to be aligned with what I'm getting from the 5 portfolio lenders I've talked to in Arkansas. I'm being told by everyone that they will lend 80% LTV OR Loan to Cost, whichever is lower. This makes it impossible to pull ALL cash out and REPEAT with my initial capital as they want some "skin in the game".

Am I talking to the wrong people or was I under the wrong impression that BRRRR's involve all cash out based on solely 75% or 80% ARV?

Thanks for your help!

Hi all,

Just went under contract today on my first property with a business partner as a 50/50 split. A lot to sort out from here.

Trying to figure out if we should go with lending in our personal names or in our LLC that is being established as we speak. I am not looking for pros and cons of owning property in an LLC or not, but rather I have loan questions relative to each scenario.

The challenge is that there is a significant discrepancy in credit scores and my understanding is that lenders pay attention to the lowest credit score when underwriting.

1. If we went conventional outside of LLC, could the partner with the higher credit score be the sole person on the mortgage (or note. Whatever term is correct), but both on title? My understanding is that the one not on the mortgage wouldn't be able to write off the mortgage on their taxes. Any other consequences of not being on the mortgage?

2. If we transferred title from personal names into the LLC we own 50/50 after closing and evaded the infamous DOS clause, would the mortgage stay in one person's name?

3. If we went the portfolio loan within an LLC route, could the person with a higher credit score be the only personal guarantor on the loan? I'm assuming it's similar to conventional lending where having us both as personal guarantors would negatively affect rates due to one having lower credit.

I understand the implications/responsibilities/risk of being the the only one on a mortgage or a personal guarantor, so not as much looking for those warnings in this case.

Thanks for your help!

Is it a problem at all that the cash would be coming from a personal account for a property that is under the LLC's name?

My understanding is that co-mingling personal and LLC funds is a no-no.