Getting Approved by Local Bank with a Partner with Good Credit?

Question

Hello, I am planning on purchasing a full functioning commercial property directly through a bank and they are willing to do the financing.  My partner has been a investor for many years and has a great track record with good credit, he is also making significant income.  On the other hand, I have good credit, but I don't show much for income for 2009, 2010.  I've filed for a extension for 2011 and I'm not sure if I should show more income to get approved, but then I will have to file for more taxes.  Or, if I should let my accountant do his magic and file for significantly less taxes.  Since I have a strong partner who is in on this deal, would you file for taxes (I am planning on doing very soon) at a high income rate and pay out of pocket for taxes or would you let the accountant work the numbers?  I'm just wondering if the bank is going to care how I look if the property is doing well and there is at least 1 strong buyer.  Thank you.

Jon Klaus · Answer

I would typically not pay higher taxes for 2011 just to show higher income.  Is that what you are asking?

With a performing commercial property, qualifying for the loan is going to be more about the property as a going concern than your personal income. When they look at you, they want to see a strong balance sheet as well as income.  I.e. your personal financial statement needs to show some worth.  They want to see some experience to show you will keep the property improving and maybe increase its performance.

Is your taxable income low because you have a boat load of depreciation?  Or other non cash losses?   The bankers should get that.

Sounds like your partner is strong enough to get this loan on his own.  if that's the case, y'all will qualify (if you don't have any serious red flags) and will be good to go.

What's the price of the property?  Net income?  How much are you going to put down?

Greg P. · Answer

Hi Jon, yes that is what I'm asking.  Taxes are low because of non cash losses.  The price of the property is 700k, net income is 72k and we are putting down 100k.  Thanks