Avoiding personal guarantees on large properties

[Dave Pl]

Let's say you're looking at a large property (a suburban midsize mall), in the $30M range. If you have $6M cash, what are the odds of having a bank or broker finance the remainder -without- a personal guarantee?

I suppose that's another way of saying "How do you make a large REI without endangering the rest of your assets"?

I realize this is a pretty basic question, but its one that's kept me out of commerical because I don't know the answer. I'm going to assume its more difficult if (like me) you've made your money elsewhere and so do not have a long track record in commercial REI.

Or, is there a typical threshold where your down payment is sufficient that the banks will take the security of the property plus your down payment without other collateral or guarantees?

Thanks for any advice!

[Brian Burke]

At that deal size, non-recourse financing is common. As Will pointed out, experience will be a key underwriting criteria. It seems strange, but I've had an easier time borrowing $5 million than $500 thousand, and worse yet the smaller loans are typically recourse. Expect to put 25% or more down, have cash reserves, and enough money for closing costs and utility deposits, so $6 million won't get you a $30 million property with non-recourse financing.

If you don't have the experience, become a capital partner with an operator that does. Good luck!