Posted by Bob on February 04, 2002 at 16:05:59:
Well it all depends on credit score, combined income, debt, and assets. If your ratios are ok then it isn’t difficult at all. There’s just a tad bit more paper work thats all.
getting a mortgage with partners - Posted by Lance
Posted by Lance on February 01, 2002 at 16:04:58:
Hi Two of my friends and I are considering buying a few rental properties together. One of them says That it is a real hassel to get the mortgage in more than one name. And wants to put the properties in my name. And get a legal agreement written up by a lawyer saying we are all responsable for the mortgage. I would be more comfortable getting the mortgages in all 3 of our names. My question is can you get a mortgage that has all 3 names on it easily or is it to difficult and also if we did have alawyer write up an agreement will they be responsable for the loan too or just me since my name is the only one on the mortgage. Any help would be appreciated thanks
Re: getting a mortgage with partners - Posted by Mike
Posted by Mike on February 01, 2002 at 17:55:03:
Set up an L.L.C.(Limited Liability Co.) where all three of you are equal partners or owners. Then buy the properties through your business. It only cost a few hundred to set up and you should do it anyway because it protects your personal assets among other advantages. Talk to you accountant about it.
Re: getting a mortgage with partners - Posted by Ed Garcia
Posted by Ed Garcia on February 02, 2002 at 01:19:38:
Lance,
In taking Mike’s suggestion, don’t be shocked if you can’t get a loan with your LLC, or they ask you to personally be the borrower or sigh personal guarantees.
I’ve heard over and over again about how investors are having a problem in having lenders accept their Corporations or LLC as a purchasing entity. I think that it’s funny how we set up LLC or Corp’s to shield ourselves and then expect people to want to do business with them. The Bank or lenders are no fool, they know what were doing, they realize were hiding behind these shields, so what are they expected to say, OK, if something goes wrong with the deal, I know that you’re outta here.
Lance, I’m sure you know that the problem in setting up a NEW Corp. or LLC is just that, it’s NEW. It has no income, no assets, no credit history or track record. It’s like a person who is starting out for the first time with nothing backing them up. However, if someone starts a Corp. or LLC and continues to operate it, developing credit in it, a constant income stream, and assets, it now has established it’s self as a CREDIBLE entity.
My suggestion when starting out, with your first few deals, is to tell your lenders that you and your partners want to put your loans in your Corporation or LLC and personally guarantee them. A Bank will have no problem with this. A mortgage co. may, so in that case tell them you want to put the loan in the Corp’s. or LLC’s name with you co-signing for them.
By doing it in this manner, you are now properly setting up your Corp, or LLC to be it’s own entity. After a few years, you then can do future deals with just your Corp. or LLC because it will have it own identity as far as being a qualified borrower. It will have income from the properties that it holds, it will have credit from paying the loans on those properties, it will have assets based on the equity position of those properties and any office equipment that you might have decided to put into or purchase with that entity etc.
I could go on and discuss how to do a LLC’s but your question was really on how to handle your partners. For them to talk you into doing the financing in your name is financial suicide. You’ll get stuck with the liability of the loans and it will affect your borrowing power.
If you’re going to use a small bank or portfolio lender then use the LLC approach given.
If you decide to use Mortgage Companies then for now and until you see where this partnership of yours is going, 3 names on the loan.
Ed Garcia
Re: getting a mortgage with partners - Posted by Lance
Posted by Lance on February 04, 2002 at 05:43:14:
Is it any more difficult to put three names on the loan than it is one? One of my partners seems to think that there is alot more involved in getting all three names on the loan. Thanks Lance