Investor · Eastern ID · Member since 2017 · 69 posts · 53 votes
I am doing a project where equity investors do not have to sign a guarantee. However the bank financed portion will require one or multiple people to guarantee the loan with a net worth equal or greater than the loan amount. I am offering a fee for the guarantors. I patterned this structure after some other larger operators I've worked with.
My question: Is there a market place or groups or directories of parties who offer guarantees?
I have used directories for hard money lenders and other service providers so I figured I would see if there is something for this.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
4y
From your description, I'm not exactly clear what you are struggling with.
I have been involved in several deals with agency debt that are non-recourse loans. Freddie and Fannie require guarantors with collective net worth greater than the loan, along with some liquidity requirements. The people signing on the note are called Key Principals. Typically the General Partner provides them compensation for help in qualifying for the loan.
Even though it is non-recourse debt, there is risk for the Key Principals. If the General Partner commits fraud, the "bad boy" carve-outs in the loan would allow Freddie and Fannie to go after the KPs for any amounts lost. Also, if the GP gets in trouble with Freddie or Fannie, it may eliminate the ability of each KP to qualify for future agency debt. This is why the KPs deserve some compensation for the risk they are taking.
In short, you need some friends with deep pockets, ones that are willing to take on some risk for a cut of the action.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
4y
From your description, I'm not exactly clear what you are struggling with.
I have been involved in several deals with agency debt that are non-recourse loans. Freddie and Fannie require guarantors with collective net worth greater than the loan, along with some liquidity requirements. The people signing on the note are called Key Principals. Typically the General Partner provides them compensation for help in qualifying for the loan.
Even though it is non-recourse debt, there is risk for the Key Principals. If the General Partner commits fraud, the "bad boy" carve-outs in the loan would allow Freddie and Fannie to go after the KPs for any amounts lost. Also, if the GP gets in trouble with Freddie or Fannie, it may eliminate the ability of each KP to qualify for future agency debt. This is why the KPs deserve some compensation for the risk they are taking.
In short, you need some friends with deep pockets, ones that are willing to take on some risk for a cut of the action.
Investor · Eastern ID · Member since 2017 · 69 posts · 53 votes
4y
@Greg Scott Thank you for the response! The loan is an in-house product from a local bank for construction so no involvment from Fannie/Freddie. I will likely just pay a friend or business partner to sign or give some equity.
More simply put, are there any people who have made a buisiness out of using their net worth to sign for loans which they find low enough risk in exchange for money. I trying to see if there is an entire industry or groups that regularly do this.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
4y
I know people that I call "KP sluts". They will sign for anyone and anything to get a piece of the action. They add no value other than that.
Personally, I like to look for strategic partners. Consider finding someone already in the industry with contacts you don't have to be your KP. When they have some skin in the game, they are more likely to provide advice and open doors for you when needed.
I know people that I call "KP sluts". They will sign for anyone and anything to get a piece of the action. They add no value other than that.
Personally, I like to look for strategic partners. Consider finding someone already in the industry with contacts you don't have to be your KP. When they have some skin in the game, they are more likely to provide advice and open doors for you when needed.
I have a $20million mixed use pre-app approved property in Washington in great frontage at an intersection where two major state routes intersect. The location is becoming a hot bed for the tech industry for Microsoft and Amazon implants, Valve etc.
Where do you find partners to bring in upfront capital? Traditional and non traditional lenders all agree, if I had $3.5-4million capital upfront, they would lend on the total. I have about 3.5million in land equity plus feasibility, so what equity would I provide to a partner bringing in that capital? Long term cash flow is great. Where do you find partners interested in investing without immediate ROI?
Investor · Eastern ID · Member since 2017 · 69 posts · 53 votes
4y
@Greg Scott That is a great point on finding strategic partners for this portion. I'm sure some of the others in the different parts the project would be happy to have a part on that side as well. Thanks for the suggestion!