Leveraging Someone Else's Lendability for Flips
I've been doing flips for the past three years and have gained a lot of experience from it, especially when we started expanding into different states. I've also gained valuable relationships, particularly on financing as I've borrowed from at least 15 different hard money lenders, both local and national. I started diving more into the financing side at the end of last year and became a commercial and hard money broker.
I've seen a lot of loans (on good deals) rejected due to these reasons:
- Not enough down payment / liquidity
- Lack of experience
- Bad credit
- Citizenship
I feel bad when there's a good deal (70% rule, sometimes 60% rule) and the borrower loses it because they can't get financing for it. I've always wondered if they can somehow just "borrow" my own fundability in order to get the deal (and at good rates). We've worked hard to build up our reputation, borrower profile, and lender relationships in order to get the best loan terms. I typically borrow hard money at 8-10% interest, 2pts, 1-yr term, and 90-95% LTC.
However, the only way I can think of making this work is if I take title in an entity with the borrower, essentially a partnership. Lenders won't consider my experience otherwise. They often require me to be a guarantor as well, but not necessarily always.
Hoping to get your advice on the following:
- Do you guys think something like this adds value? I know Brandon Turner has mentioned the idea of a credit partner on deals to lock up bank financing, but this is more for fix and flips and hard money.
- What are some risks I should be considering, and how can I protect myself from it?
- How would you structure the "partnership" with other investors?
