You want to purchase rental homes, but do not have enough money saved or enough income to afford one, so, you talk to your friend who is also thinking about investing. Can you get financing if you purchase rental homes together? Or, you are part of an investment group looking to purchase rental homes. Can the investment group get financing?
Yes, you can. First, each of the investors must complete a loan application to qualify for conventional financing. For example, if you and 4 friends are looking to purchase a rental home, all 5 must complete a loan application. The lender will base the interest rate off of the lowest credit score in the group. Second, plan on saving enough to make a 20% down payment, or even a 25% down payment to get a better interest rate. Third, when it comes time to close, you must close in your individual names. So, if you wanted to form a partnership or LLC, you cannot close in the name of the partnership or LLC. The lender will lend to you individually but will not lend to a business entity because the entity could go out of business without the lender having any recourse. As such, make sure you get enough insurance to cover you and all in your group in the event of an accident on the property. You may want to consider an umbrella policy which provides coverage over and above the liability limits in the policy.
We have helped many friends/families/groups finance investment properties.
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