Non Recourse Financing
What loan amounts typically qualify for non recourse loans. I am looking at a 12 unit apt building-- the lender i spoke to said it would require a personal guarantee
and non recourse loans only available for loans over 2.5mil. Has anyone been able to obtain non recourse for loans under $500,000.
Many thanks in advance. 
No way. Unless there are other factors that would move an institution to do so.
It is very possible but requires you to be in a situation where you are a very good client and that a non-recourse loan is not a negative thing.
You need to look at what the non recourse really is. It is a loan made with the preconceived notion that you will fail, and they will get your deal. Or that there is no way on earth that you will fail, and they get paid quickly. That being said, for a non recourse to work, you will need the deal to be one that they are willing to take over or a short term investment. Some of the motivating factors will be: 65% or less buy price of FMV, 6 months payments in escrow at closing, stellar credit, and/or something changing after purchase to raise the value considerably.
For a property that small most of the investors in that arena, will not do it.
Depending on your situation, you may want to look into private financing, partnering with an investor, interest only loans, etc etc.
I know this wont help you now, but if you start a c-corporation and do your lending through that with your personal guarantee, after about 5 years you can have the c-corp do its on lending without your personal guarantee, making it a non recourse as well.
Good Luck,
Kyle
"...if you start a c-corporation and do your lending through that with your personal guarantee, after about 5 years you can have the c-corp do its on lending without your personal guarantee, making it a non recourse as well."
Kyle,
Nice point. But what about the double taxation issues involved with a C-corp? Don't those really take a whack out of your RE returns?
CT
I recenlty helped someone look into a non-recourse loan for under 200K. There are some lenders ... though they're very hard to find! ... who will do a non-recourse loan if the situation is right. What kind of entity would be getting the loan - Who's name would the loan be under ... a corporation, a business?
Your name is Mother F-----? Do you experience difficulty when trying to find a proper response when hailed on the street? You are a Broker and this name is acceptable?? I know I know, I am also a broker and have answered to the above epitaf. But normaly after I have thrown at least one rock, or bitten the ear of my earstwhile combatant. Perhaps you will consider a change. My daughter who is 15 brought your posting to my attention. This of course after yelling it across the room. This did disturb my cat and life is not now pleasant.
Perhaps, Mother Lover, or Carnaly intruding to Mother. Or maybe the Latin could be utilized. Frankly the name Plotches.
I place Non Recourse Notes with most of the local banks. Their standard requirement is 50 % equity position. This is of course based on the average equity position of a first mortgage prior to WWII. If you remember it was the creation of FHA etc. etc. that made the equity requirement in lending start climbing up and up to the present level of about 110%.
I also on occasion when it is a little tricky Offer to take the Recourse position. On any foreclosure I will take an assignment of the note. Substitute in a properly motivated Trustee and run the sale. My game plan is as usual to end up with the property . For that control of sale is imperative. There is no redemption time period here in Calif. So it is a rather attractive game.
Your logic is a bit strange, I am always looking for the giving of recourse it makes the gain of the property a little more secure.
My best to Mrs. MF and all the little F------s.
Cheers Lucius 8-) 8-)
I would second Kyles strategy with the addition that you start with a S corp until a C is warranted. There are some significant tax advantages and you can change a corp back and forth from S to C and C to S.
[addsig]
"do its on lending without your personal guarantee, making it a non recourse as well"
non-recourse against whom?
All the assets in the holding entity are at risk, just no personal risk.
Some in another them was atlking about using LLC/corps as an asset protection techniques. May some FAQs about liability protection, asset protection, piercing the corp. veil, etc. would be good.
.
Quote:
On 2004-06-25 16:59, Stockpro99 wrote:
I would second Kyles strategy with the addition that you start with a S corp until a C is warranted. There are some significant tax advantages and you can change a corp back and forth from S to C and C to S.
S to C is no problem, but I thought C to S was not allowed. Am I wrong on that?
CT
Lufos: Bravo!! Well said!!
[addsig]
CharlieTango, you are absolutely correct about the taxation, but as a c-corporation you should be able to figure out enough ways to circumvent that through tax breaks in other ways.
Kyle
maybe i'm missing something, but the way i understand it, non-recourse debt seems to be the best for everyone involved. i truly don't understand why residential loans are not always non-recourse. i do a great deal of pre-foreclosure business, so maybe i just see the debt that never gets paid anyways. here's what i see...
full recourse debt:
borrower defaults
lender begins foreclosure process
3-4 mos pass
auction is scheduled in 30 days
borrower's lawyer finds a misspelled word in the foreclosure docs
auction is cancelled
another month passes
another auction is scheduled in 30 days
borrower files bankruptcy
auction is cancelled
another month passes
borrower never goes to the creditor meeting
another auction is scheduled in 30 days
borrower files bankruptcy and goes to the creditor meeting
property hung up in bankruptcy for the forseeable future
the entire time this is taking place the owner has absolutely no incentive to do anything whatsoever to keep the property in any reasonable condition, prevent code violations, etc
non recourse debt:
borrower defaults
lender takes control of property
lender installs property manager
prop manager evicts/ejects owner (if also tenant)
lender disposes of property on retail market
the way i see it non recourse is the way to go for everyone. skip the foreclosure process, nobody likes it at all.
I stumbled on this post because if you want to use a "self funded" IRA or Roth IRA to help fund a deal a lender will have to make any loan a "Non Recourse" loan. Other wise to use "Self Funded" IRA moneys you need to fund 100% from the Self Funded IRA. Not a very good use of those funds I prefer to leverage my money.
If there were a lender who would have decent/do-able Non-Recourse terms a lot of IRA cash would be able to move to Real Estate. Perhaps some lender reads this thread and sees some big profits.?? I know I could make my IRA money work much better in RE than the Stock Market.