I've created an LLC with 2 other partners for the purpose of purchasing a home to flip. What's your opinion on purchasing a property under the LLC vs the traditional route? I've seen that some investors create a new LLC for each project instead on one for all investing related activities. Any pros or cons from a financing perspective?

Secondly, other than private and hard money, what are our best financing options to consider? Conforming loan for the purchase of the home + HELOC for the construction cost? Most of the properties we've considered so far are on the MLS and should pass a bank appraisal .

With this being our first flip, I'm not confident enough asking for private money until we have a better resume so I was hoping to come across other financing options.

TIA

You are definitely going to want to set up a Single Purpose Entity for purchasing the house. It protects you and your partners from significant liability and your assets.

Additionally, I would set up another layer of protection in using an LLC you control as the partner participating in the SPE.

Regarding financing, I would advise finding local banks or credit unions that still have an appetite for flips (more and more banks feel really exposed here and aren't willing to add more of these loans to their balance sheet - speaking on behalf of the Austin market.)

My most recent loan was a 70% LTV of purchase/building costs (not ARV or after repair value). Mind you, this is for a tear down and new build vs. flip, but terms should be similar. Terms were 12 months with an adjustable rate at 1% above WSJ prime and 1% origination costs. The loan is interest only payments based on amount drawn (hard money charges interest on the full loan amount throughout loan duration).

Getting a loan like this will save you a good chunk of money vs. hard money.

There are a number of different options that exists between conventional and true hard money. A lot of it depends on how much work a specific house might require that will dictate what option might be the best way to go.

But, a conventional loan (meaning backed by fannie/freddie) with the lowest rates etc will NOT vest in a LLC. That does not matter who the lender is. So, to vest in a LLC it would have to be a portfolio loan or a private investor.

jjdavis-

If you have any questions regarding hard money, feel free to ping me. I am a hard money lender would be happy to help or walk you through it.

It's imporant to understand timing. Even if you are "bankable" but the bank takes 30 days you will miss out on most fantastic flip deals. It's all about understanding the timing and the costs associated with having a "like cash" offer. A lot of deals with great margins have those margins because the need to execute immediately and if you can't buy in 7 days, someone else that can with be awarded the contract. Good luck building a flipping business with bank financing. If you have the cash and the ability to refi, then it is a different story.

Also even though we are expensive. We'll do 100% LTC if bought deep enough so your returns go through the roof over conventional financing. For those that understand the cost of equity vs the cost of debt there are instances when hard money is an absolute steal.

Flip: If you're going to be flipping multiple properties, check out the Texas Series LLC. If set up properly and managed properly, it is great entity for these types of operations. Also saves $ since you don't have to create a new LLC for each project.