A Strategy For What To Do When The Bank Says No

by | BiggerPockets.com

It’s an all too-common story – you have the perfect deal, great cashflow, awesome equity, and a plan with details so perfect it rivals a military handbook. You confidently show your plan to the banker and BAM! It’s over. They may not physically laugh in your face, but the effect is the same. You go home defeated, knowing you are going to miss out on another great opportunity because of the tight lending standards today.

I don’t need to say it, but I will anyways: bank financing is difficult to get. For some, its simply impossible. Sure, if you have a stable job, huge income, a nice smile, and boat-loads of money in the bank your banker is going to be your best friend. Chances are, however, all you have is that smile.

How can investors overcome this? How can we get the bank to say “YES”?

We can’t.

Okay, sometimes it is possible. There are many good articles on BiggerPockets that will help you get your bank to say YES to you and your request. However, in the end – the bank is probably going to still say “NO.” So where do you go? Do you shut off your brain, turn on Dr. Phil, and focus on your next great idea?

I want to talk briefly about one strategy I use to bypass the system and make it work. I am not going to tell you this is the world’s greatest investing system (that you can learn for just four easy payments of $999.99) but this is just one tool in an arsenal of many that you should have in your bag of tricks. No, I am not the first to use this, nor the last. I don’t claim any special supernatural powers, nor do I say this technique will work for anyone. It is simply one more tool to invest in real estate with.

Let Me Introduce You To Bob:

Bob is responsible. Bob pays his bills. Bob even has a good job, good credit, and a nice smile (optional). Bob is a banker’s best friend.

There’s only one problem:

Bob is not a real estate investor.

Bob doesn’t find deals, Bob doesn’t go to seminars, Bob doesn’t even know the difference between front-end and back-end debt-to-income! (Okay, most seasoned investors don’t know even know that one, so if you want to set yourself apart, go figure it out!)

You, on the other hand, find the deals, you go to the seminars, and you can tell the difference between front-end and back-end debt to income. You are everything Bob is not, and Bob is everything you are not. Together, you and Bob form a superhero team that even Batman would be jealous of.

Okay, you’ve heard this before. Partnerships.

So why bother reading the rest of this?

Because I am going to teach you three ways to use partners that you probably haven’t thought of.

Because you aren’t moving forward. You are struggling to get bank financing and losing deals. That needs to stop. Besides, this is more than just a partnership. This is growth through relationships.

Investing in Real Estate is Cool.

Let’s face it – real estate investing is cool. If the world was a junior-high playground, investors are the kids with the Air Jordan’s.

Every kid wants to be cool, and every adult wants the same. While the classification of “cool” has changed, the concept remains the same. Everyone wants to be cool.

Especially “Bob.”

Bob looks at you and see’s “Cool.” He sees that you are out there, wheeling and dealing, and are making things happen. You are going places. You are fighting “The Man.”

Bob wants to be cool, but he does not have the time. Bob wants to invest in real estate, to see his money making money, but he simply cannot. Or will not.

By joining forces, you and Bob can become unstoppable.

How to Find Bob

“Bob” is everywhere. Chances are, most of your family and friends are a “Bob.” Most of the people you run into at the grocery store are a “Bob.” Your doctor is probably a “Bob.”

I am not suggesting that you go out and ask all your family and friends for money. In fact, quite the opposite. I don’t recommend ever asking for money. You don’t go to Wal-mart and find the employees standing around asking you for money – but you pay them. Why?

Wal-mart has something to offer. They have a product to sell, something that sets them apart. Whether its convenience, price, availability, or functionality – something made you decide to pay Wal-mart for that product.

In Gary Vaynerchuck’s book, “Crush It” he speaks to the importance of turning yourself into a “brand.” Chris Clothier mentioned this book several weeks ago in his excellent review of his top five books that keep him motivated as a real estate entrepreneur. I believe developing yourself as a recognizable brand is the number one way to attract money to yourself and your business. I’m not suggesting a national brand, but rather a brand within your community and your network.

How do you build your brand?

Your brand consists of two parts – yourself and your product. You might buy Oreo cookies because of the name “Oreo” but also because you were in the mood for a sugary chocolate cookie. The same is true with your real estate investing. You need to develop yourself personally as well as the product you are offering. Let’s look at both those parts in more detail:

  1. Yourself – how do you “brand” yourself? Through reputation, knowledge, and experience. When you know what you are doing, and you are out there doing it, you build all three of these areas. You personal brand is strengthened with every book you read, every blog you devour, every meeting you attend, and every house you look at. You can also build your personal brand in other, more indirect, ways such as blogging, hosting free (or not) seminars, commenting on the forums on websites like BiggerPockets.com, going to your local investor’s club, and simply knowing people and building relationships.
  2. Your Product – you need to have a product worth selling. Oreos did not become huge because they tasted bad. They are (in my opinion) simply incredible. Your deals need to be the same – incredible. If you are having difficulty financing a deal – you need to ask yourself if it really is a deal. Additionally, and just as important, you need to package your deals correctly. When you talk about a deal, do you mention about how great it might be, or do you have a five page written analysis of it, complete with repair estimates, color photos and recent sales comps?If you build your brand, you can believe the money will follow. When Real estate investing becomes your life, you will find that you can’t help but talk to everyone about it. In turn, those people you talk to about it might talk to their friends about you. Brand loyalty can spread like wildfire if you take care to continually fan the flame. Bob will find you – and when he does, it’s time to make him “cool.”

What to Do With Bob:

You’ve found Bob. Perhaps a neighbor heard you talking about a recent deal, or your sister’s boyfriend’s aunt heard about your skills and wants to get involved. There are many ways in which I currently work with “Bob” to benefit both of us, and the type of business relationship depends significantly on the case-by-case situation you and “Bob” are in. However, here are three ways to use “Bob”:

Three Strategies for Partnering to Find Success in Real Estate Investing

  1. “Bob” puts down the money needed for a down-payment. This is typically 20%, but can differ slightly depending on what lender you use. Bob gets the entire mortgage in his name alone, but Title is taken in both names. (Most lender’s do allow this, but your state may not. Always check with a lawyer and/or tax professional.) You split the cashflow and future equity in whatever split you agree upon (I like 50/50).
  2. Bob invests for solid returns – You offer Bob a solid interest rate on his money. His money becomes your money. In essence, Bob has become your own personal hard money lender. Bob protects his interest with a lien on the property and you are able to buy it and do what you wish with it.
  3. Bob uses his credit only – no cash involved: You use a hard money lender to purchase a property, including repair costs. If the deal is good enough, this should be feasible. If not, you probably shouldn’t be buying this deal. After the home is rented and producing good month-after-month cashflow, Bob refinances the home into a fixed rate, long term mortgage. Just as I mentioned above, Bob will probably be able to have the loan in just his name while the house title is in both yours and his.

I have used all three of these strategies to invest in real estate, and all three have worked out magnificently.  Yes, I am giving up 50% of my profit and cashflow to someone else. However, 50% is better than 0%. Without Bob, I am often stuck up a creek without a paddle. Bob gives me the security I need to sleep at night, to keep moving forward, and to do what I do best – putting together deals. It also lets other people learn how to be cool and gain a huge foothold in getting financially ahead.

Partners are not for everyone, and not everyone will make a good partner. However, when you can use a partner to move your business forward close more deals, they are invaluable to have. Real estate investing is a relationship business and without others – you will never succeed.

Have you tried using a partner to move forward on a deal?

Photo: Victor1558

About Author

Brandon Turner

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He began buying rental properties and flipping houses at age 21, discovering he didn’t need to work 40 years at a corporate job to have “the good life.” Today, with nearly 100 rental units and dozens of rehabs under his belt, he continues to invest in real estate while also showing others the power, and impact, of financial freedom. His writings have been featured on Forbes.com, Entrepreneur.com, FoxNews.com, Money Magazine, and numerous other publications across the web and in print media. He is the author of The Book on Investing in Real Estate with No (and Low) Money Down, The Book on Rental Property Investing, and co-author of The Book on Managing Rental Properties, which he wrote alongside his wife, Heather, and How to Invest in Real Estate, which he wrote alongside Joshua Dorkin. A life-long adventurer, Brandon (along with Heather and daughter Rosie) splits his time between his home in Washington State and various destinations around the globe.


  1. We did 27 partnerships last year.
    Another great thing about partnerships, when you have a successful one, they want to do more.
    So do their friends and their family.
    You only have to find the first one or two on your own; your business grows generically from there.
    Give them a good deal with good returns and they’ll follow you forever!

    • 27! Wow, Karen! I need to step up my game 🙂

      You make an excellent point- once you get a few successful partnerships, it will grow automatically. Like I said about “being cool,” people will tell their family and friends about how cool they are, and the news will spread.

      The other great thing is that each of these partnerships is a separate income stream. They all can grow independently of each other, giving you a share in many different avenues of building wealth.

      Thanks Karen! Keep up the awesome work! (And now I know who to go to when I have a partnership question!)

    • Hey, I’m really interested in investing in real estate, but I have no credit. I could easily invest 5k. I would even donate time to oversee upkeep of the property. I really just want to learn. Even if I couldnt invest until I had more money, I would want to volunteer and learn (free) on my time the business. Currently, I am in Property Management. I basically work for the investor, but I want to be the investor one day. Thoughts? Ideas on how I could make this happen?

      • Jimmy – Where do you live? Can the investor you work for mentor you?
        I recommend that you find a successful investor in your area who is willing to train you. (make sure they are successful)
        We coach and train others in our area and I would think other investors are doing the same. You can either do additional work for the investor to learn or pay a monthly fee. Apprenticing is the best way to learn. There should also be a local Real Estate Investor Group in your area (REIA group) where you can hook up with like minded people.
        Check out http://www.nationalreia.com to find the group nearest you.

  2. Speaking from the “Bob” or partner side. Karen is absolutely correct. The first deal is difficult for the passive partner. Providing a good deal with a seasoned team to make the process seamless and as hassle free makes for great relationships.

    My current deals are new construction and rehab lending. The new construction the first loan went well but the current, second has not, so there is no relaxing on your quality standards never become complacent. “Bob” will drop you and with how quickly and easily information is available with electronic media, it is just not worth lossing your banks.

    My other partner is fantastic has a fantastic team in place and most importantly the entire team including “Bob” (me) understands the need for efficient communications. Our response times are generally measured in minutes from the lawyer, loan processor, coordinator, etc. As Karen points out, once “hooked” we keep coming back. There is a lot of trust and communications necessary, both sides need to foster and support the relationship.

    Personally, this has been a great opportunity, however, many of my friends are too conservative to “risk” this type of investment. I personally sleep better knowing my investment is backed by real estate instead of the emotion and market makers.


    • Brandon Turner

      Thanks Kevin, It’s great to hear some perspective from the “Bob” in a partnership. Like you said, “there is a lot of trust and communication necessary.” That is huge! It takes time to build that trust, but it awesome when it is there.

  3. Cameron Carter on

    Working with partnerships can be great, but you absolutely must have them structured and documented correctly. I’ve seen many people get stuck when a deal goes bad and there is no formal agreement to guide the partners (or the remaining partner) in cleaning things up. Maybe a follow up on this topic would be helpful.

  4. Frank Jutras on

    These are great tips on diverse types of creative financing; I love it! There are not a lot of people out there who give this information for free. I love the strategies of financing with Bob in that article.

  5. Great article! I was searching for info on this very topic. I am currently working with a private investor using strategy #1. He will provide the cash for the down payment & I will use my credit to finance the property. I will find the properties, oversee the property management & the sales process. He is purely passive. Plan is to split the profits 50/50 when we sell (5 to 8 year exit plan). For those who have done it this way, I’d like to hear how you structured a couple things:

    1) Cash flow – Is it best to simply roll all cash flow into a reserve account that is only to be used for operating expenses. Anything left over in the end gets split 50/50? Or, split it 50/50 each month?

    2) Who typically is responsible for the cost of repair, maintenance, vacancy, etc? Unless we agree to roll all cash flow into a reserve account, I feel like the cash flow should go to the person paying for these costs.

    3) For tax purposes, is it common to structure an agreement that allows both partners to claim 50% of the depreciation & passive losses?

    Thanks in advance for your feedback!!!

    • Brandon Turner

      Hey Brian, sorry for the delay in responding!

      1.) I save all my cashflow for 2 years, then keep one year in reserves and distribute the other year each December after that. This way, I always have a minimum of one year in reserves, and a second year’s worth accumulates each year.

      2.) Yeah, reserve money covers this.

      3.) DEFINITELY talk to an accountant, cause there are some state-specific requirements to make sure this is done right. Very important!

      Hope that helps some!

  6. I see that Brian’s questions haven’t been answered, I’m looking for answers to these questions as well…anyone? Also, what types of documents are needed in this type of partnership? how would you structure the deal to protect the passive investor?

  7. Christopher Albritton

    Great article! This definitely sheds some light into the partnership aspect of real estate investing, which makes it tens times more accessible for new comers (as I hope to be after I graduate from UF – here I come Spring of 2016!). I am curious about one way you mentioned partnerships can be done – the 50/50 split scenario.

    I feel that an example might be better to help convey which part I’m curious about. A partner and I want a 4 plex. It cash flows 2400 a month. After all expenses (let’s just say 1000 using the 50% “rule”) I have 1200 left over for the mortgage payment, which will be 429 based on a 80k loan @ 5% for a 100k property. Cash flow is 771, so between us we would split it and get 385.5 each. Where does future maintenance come into play in all of these calculations? Is this included in the 50% taken out earlier, or does this need to be accounted for in the cash flow?

  8. Hello, I am the perfect Bop so flippers out there with an history of ongoing success should feel free to contact me. I am fortunate enough to to be a hands-off real estate cash/money investor and I am willing to invest boatloads of cash only, $50k cash on hand straight from bank account for starters, without having to be involved with the decision as you stated considering that I have a rather rewarding caree as an health-care professional that keeps me busy enough…plus I have outstanding credit so I could easily cash-advanced an additional $20-25k or more via CC with 0% APR besides the $50-100k cash on-hand from bank account, for a total of $120-125k for a single large flip or multiple flips (as PM or PML)?

    Where/how do I find experienced flippers whom are currently in the works with lots of experience and successes that could flip and generate ROI within 90-120 days? I’m only asking 50/50 split on ROI, which is fair enough.

    I’m a very serious no-hassle investor so any real leads are appreciated. I am willing to invest anywhere in the USA so long as it is a legit business and I have all detail to show that I am not being scammed out of my hard-earned cash. I’ll invest $30-60 large for starters and then invest as much as 100k or more for a single large flip or multiple flips. If the results are promising, I shall continue to fund future projects hassle-free as I’m very reliable, I have excellent credit (high 700’s and fast approaching 800s), and I’m in it for the long haul. Please advise; thanks ; -).

  9. Cody Robison

    Hey Brandon i would like to ask another question that has not been mentioned. but with option #1 deal when would bob see his 20% back? or is it just when the property is sold he would get that back and the rest is split 50/50? i would be managing the property and making any repairs. how is my time and knowledge paid for? or is that just how the deal works since they are providing the money? i do most my repairs myself unless its a major project like flooring and roofing. so would you typically charge yourself a service call for your time? thanks for all your great info you provide

  10. Eric Horvat

    I’m retiring in 2 years and plan to move from San Antonio to Oahu. Trying to learn how to structure a partnership with daughter and son in law to purchase home or condo that my wife and I could live in and my daughter would have as an investment.

    I’d probably have $250-300k from my home sale and income of approx 8k/ mo from retirement. I don’t want to spend much more (approx $1k/mo) than I would if I stayed put. Not worried about equity from my current home sale since it would go to kids eventually.

    Any advice on how to set up that is fair as fair? If I put $100-200k down how much would be “fair” for me to pay per month given they would get all equity later?

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