Structuring a Down Payment Partnership

4 Replies

I’m trying to figure out the best way to structure this deal, and also the best way to present to the bank so I look like I know what I’m talking about instead of fumbling around like a doof.  

Currently, most of my RE funds are tied up in another project. However, I’m making an offer on another property today. Should my offer be accepted, I have to get a little creative with my financing strategy. 

Because my partner and I are low on liquid as of now, we are considering bringing on a partner to fund the down payment of this property. But, we would like this partner to be in this solely as our “lender” for the down payment. So, she supplies the down (with interest on our payments to her), but she is not an “owner” of the property. When we get our funds out of our other project or we refi, we would pay her off and her part in the scenario is done. 

Just as an FYI , this is a commercial property. 

Any thoughts or strategies on this situation? Also, will a comm lender go for this? (Property is only about $325k, so this isn’t a multimillion dollar deal)

@Wendy C. do you and your partner have a relationship with a local banker? If you did, I'd ask them. 

You described getting a second loan for the down-payment. As long as you are up front about this to the bank and their loan is still in first position, it is just a matter of find one that feels comfortable with this set up. 

The issue I see is that the bank will still want to see a DSCR of 1.2 and that could get tricky with what is essentially 100% financing, but I'm sure there are exceptions and work arounds that I don't know about.

Is there a value add play for the property or is your lender willing to take deferred payments or IO for a period of time? That could help with the DSCR.

Hi @Bill F. , thanks for your response! We used a local credit union for the loan on the other project we're currently working on. Big time value-add on that one, and we've already made leaps and bounds on the NOI. So I was thinking of going to talk with them, however, that project was our first with them, so that's their only track record with us so far.

It does currently have a better than 1.2 DSCR. It is also a value-add, and with just some slight tweaks done immediately after closing, it would be even better. Sounds like my best bet is go have a chat with them, and if they aren't into it, I'll start making some calls around town!

Hey Wendy, good to see you succeeding! I just wanted to recommend Timberland Bank as you seek out financing for this next deal. Being a local bank and a portfolio lender, they can be more creative with financing projects. They have a good reputation for being investor-friendly. Keep up the great work!