Family friend needs options to come up with downpayment...

3 Replies

So I recently put under contract a 90-unit building and the downpayment is $600,000. I can put up the entire amount but would rather take a smaller slice and a family friend is more than willing to put up the other $300,000. Problem is that his bank will not refinance any of his current rentals as he only has about 25-30% equity on his homes. His personal residence is at about 40-50% equity but his current banker isn't sure if they can do a refi in time for closing (about 3 weeks out).

Here's what he has:

35 SFHs (all cash-flow positive, put about $1.2M into them and currently has about $2.4M of equity and market value of almost $7M)

Personal Residence (worth about $500k and owes almost $300k on it)

$500k in his 401K (max loan is $50k, and withdrawing isn't an option as he's in the 35% tax bracket + 10%)

He has over a $2M coming in from an overseas sale within the next 3-4 months so he's willing to pay a 10-12% interest if needed. Would there be any sort of company that would do a hard money loan on his SFH portfolio? Or perhaps against his 401k? He'd only need $300k so he can put up the $500k 401k and should he default, he would cash it out and net $275,000 on his 401k.

Any suggestions or guidance towards a company that might be willing to help would be gladly appreciated!

@Mo Karney , I can think of 2 (relatively quick) solutions: 

  1. You put up the $600k, he pays you his $300k+interest in 4 months after the sale closes.
  2. He gets a Line of Credit against his SFR portfolio. If he has $2.4MM of equity, he shouldn't have a problem getting a $600k line. Another advantage here is that after he pays off the LOC with sales proceeds, he still has access to that money.

@Jaysen Medhurst

Thanks for the advice Jaysen. I'd rather just take the entire deal to myself than do the first option; but I'll see if any banks or someone can do a LOC on the equity.

We reached out to RCN Capital to see if they could do a refi and just bundle all the homes into one just so it makes things easier in the future cause we have a few more deals down the line.

When it comes a LOC, would a normal bank offer something like that? He's got roughly 30% equity in the properties and he only only needs 5% of it to cash out....