Too late to partner up?

6 Replies

Hey everyone. I've recently learned that a good friend of mine is in the process of trying to purchase a small apartment building. After talking and noticing that we have the same goals, we figured that the best course of action would be to partner up. He has already sent a letter of intent and applied for financing. He was told that once the process starts it's pretty hard to add on a partner because we'll both be back at square one. How true is this? If it's actually easier to let him continue with the process, how hard is it to partner up after the fact? I'd be bringing in half the down payment and splitting everything 50/50. Thanks in advance!

@Chris Sisney depending on the lender and the type of financing such as nonrecourse debt, this shouldn't be a problem to add a partner.

Also, you stated that only a LOI was sent to the seller so your good friend isn't yet under contract on the asset. Many things do change from LOI to actually closing...again it shouldn't be a problem to add a partner.

Good luck with the deal.

@Chris Sisney you should be able to still partner, especially if all he's done is submit and LOI and apply for lending.

And what does "back at square one" mean? If he's found a deal, and the LOI gets accepted, then keep moving forward. If you're bringing in 50% of the down payment, then y'all will need to let the Lender know that, and they will most likely require that you sign on the loan as well.

Originally posted by @Chris Coleman :

@Chris Sisney you should be able to still partner, especially if all he's done is submit and LOI and apply for lending.

And what does "back at square one" mean? If he's found a deal, and the LOI gets accepted, then keep moving forward. If you're bringing in 50% of the down payment, then y'all will need to let the Lender know that, and they will most likely require that you sign on the loan as well.

 Great point - maybe you have to start over with the lender, but you're not back at square one! You still have a deal on the hook. Keep going!

@Chris Coleman I'm not sure what "square one" meant exactly but I'm guessing the real estate agent might have used those words to scare off using a partner. Maybe he assumes it'll take longer. My friend and I are both doing this for the first time so that's why I reached out to this community. I trust the advice here more than someone who's actually profiting off of the deal. Thanks for the advice!

Originally posted by @Chris Sisney :

Hey everyone. I've recently learned that a good friend of mine is in the process of trying to purchase a small apartment building. After talking and noticing that we have the same goals, we figured that the best course of action would be to partner up. He has already sent a letter of intent and applied for financing. He was told that once the process starts it's pretty hard to add on a partner because we'll both be back at square one. How true is this? If it's actually easier to let him continue with the process, how hard is it to partner up after the fact? I'd be bringing in half the down payment and splitting everything 50/50. Thanks in advance!

You can take on partners, recap equity, syndicate etc. any time you want, before, during or after you close.

@Chris Sisney I am going to guess that you are doing a smaller deal with either conventional financing or a local bank. If this is a 1-4 unit then you would have to re submit the loan. You should still be able to use the appraisal though. If this is a 5+ unit deal then you just start over at the bank and they add you on as a guarantor. Honestly, this is not that big of a deal if it makes sense for both parties unless you are 1-2 weeks from close.