Non Recourse Loan underwriting criteria with First Western Federal Savings Bank is very straightforward. We look at 4 areas when determining whether or not to make a Non Recourse Loan. The main areas are:
- Does the IRA or SoloK or IRA LLC have enough money? What I mean by that is, does the Plan have the requisite 40% down payment necessary for most properties we finance, plus closing costs, and liquid assets still left in the Plan of 15% of the loan amount as reserves.
- Does the cash flow from the property pay all operating expenses such as taxes, insurance, maintenance, management fees, and loan payments and have excess cash flow each month? We want to see a minimum of 1.25 Debt Service Coverage.
- Is the property a good property in terms of condition (doesn’t need a lot of work to be rent-ready), neighborhood, priced in line with other homes in the immediate area, conforms to other surrounding properties, etc.?
- Management of the property will be solid, whether you as the owner of the IRA are experienced in rental property management yourself and can handle the issues involved or will have professional property management if the property is located in another state or you just are most comfortable with professional management.
If a non recourse loan request will have these 4 components covered, then you are well on your way to acquiring that rental property in your SD IRA or Solo K or IRA LLC.