Seeking some advice on a partnership using a hard money lender...
I'm going to fund the purchase price (via HML), while my partner will manage and fund the rehab out of pocket. Strange thing is some of the HML's are requiring he be on the loan and I don't understand why... This complicates the partnership as it dilutes the value I can bring by assuming the risk.
In my experience so far there are HML's that also fund the rehab and some that do not, so how is it any different in underwriting's eyes if I just never take a draw with an outfit that includes the rehab funds? This seems arbitrary to me...
Thanks in advance, really appreciate anyone that can add some insight here!
Is he on the LLC? If he is, he need to sign the loan too.
You should buy the property under ur own llc, get a Loan under ur company, partner with him on the side. Pretty simple. Only problem is if you don't have the experience to show a HML to get the loan
@Syed H. no he is not. This is a new partnership so we wouldn't have a track record under a new entity anyways...
I don't see what that would have to do with the rehab funding vs. non rehab funding HML's?
Is he on the contract to purchase the property?
Is the corporation that you are using to purchase the home the new partnership that your partner is on?
Do you have sufficient funds to get the rehab done without him funding it?
Those would be the only reasons I would see as to why the lender would require him on the loan is if they see another buyer on the contract, a partner on the corporation or that you cannot get the flip done without his money so they are wanting him as part of the loan since he his funds are needed to get eh job done and/or has equitable interest.
So a few issues here. One, if he is a partner and will get a portion of the profits, he should be on everything. Most HMLs require that they are the only lender. So either he is a lender or he is a partner. If he is a partner, he needs to be on the loan, if he is a lender, it will probably kill your financing with your HML. Another issue, most HMLs will want to lend on the repairs as well. That is their best guarantee that the work will actually be done on the home. The company I work for will cover a lot less (we use an as is value vs ARV) when the repairs are not part of the loan.