Question:
A few friends and I have recently been talking about investing in Real Estate. We've all been working for a few years and have the liquid capitol for downpayments. One of my friends suggested that if we form an LLC and pool our resources, we could buy more property, lower individual risk and get better returns. The idea is that we each put in $50-100k (we haven't reached an exact decision as to what the buy-in will be) and split profits evenly.
Here's where it gets fuzzy for me. We all have different credit scores and one of my friends has a pretty low one (mainly due to personal stupidity). On the other hand, a couple of us have pretty phenomenal credit and have prequalified for mortgages, but because of this idea, have been holding off on making bids on property.
Answer:
It is tough right now to find financing straight into your LLC. In fact those that offer it usually will force you into a pretty crappy loan product (short term adjustable rate or hard money terms).
Also Banks/Lenders really don't like LLC's who are new and/or are a pool of investors.
If you go into this loan with multiple people (outside the LLC) the bank is going to use the lowest (middle) score of the bunch. So the gal with poor credit will really bring you down in the Bank's eyes. Credit is really important right now especially when doing an investment loan.
The best think you can do for yourself if you cannot qualify on your own, is choose to partner with folks with good credit and assets. Also I would caution you (no matter how good of friend you are) to go into business with someone who may not be responsible with their credit. I personally don't like to partner..expecially with friends! I like to control the deal and make the decisions and not have to worry about other personalities and personal situations rolling over into my deal.
Just my 2 cents!
Happy Hunting!
This blog by:
Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com
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