Fellow Investors, do you know of any Sharia Compliant Lenders?

Question

Hello,

I'm an investor out of CT. My partner and I have 3 properties that we are in possion of and desire to do 6 deals by end of the year.

I'm looking to find Credit Unions, Lenders etc that provide Sharia Compliant Loans. As a Muslim I am not interested in traditional interest backed loans. So I am looking to do my first few deals (before the need for portfolio loans and private capital) with sharia compliant loans. For your information, a sharia compliant loan requires the lender to have skin in the game and make profits from rental/lease agreements with the buyer. What would normally be interest is revenue and what is customarily principal becomes shares in a partnership between the buyer and the lender.

So far I have found UIF, Guidance, Devon and IJara.

Has anyone else found further options? I am ok working with these, but the more options and possiblities the better deals can be made.

Thanks & Cheers,

R. Ali

Matt Devincenzo · Answer

It's to comply with Islamic Sharia law that prohibits paying/charging interest. Certain sects of Jews also buy with similar loans as they also prohibit paying/charging of interest.

Adam Bartling · Answer

@Rasheed-mass Ali Now I am going to hurt your feelings and that is ok, you have to Open your Mind one day.   I have tons of Desi clients for both my companies and my wife is Muslim born in Pakistan.

Here is the low down. All lenders charge interest, it is the opportunity cost of the money.

Let's run your Sharia scenario...

You get a house for $260,000 and you put down 20%  APR ( annual percentage rate) 7.47% if you pay it off in 30 years you pay 142% of the Purchase Price.

Now lets Sharia it!  You want to pay the house off Early, you pay the house off in 20 years, do you pay the entire amortized amount over 30 years?  No. all the institutions will calculate that you paid off the home early and will pay less interest.  If the lender was to hold you accountable for the 30 year payment price you would be a little more than angry.

Calling Interest something else does not change that it is Interest.  Class dismissed!

Rasheed-mass Ali · Answer

Pleasure to meet you Adam. Good to see people with experience of different culture, I think that's vital these days. In reflection of the Desi's you work with, I'll say what Salahuddin said in "Kingdon of Heaven" .. simply put "I am not those men.."Having exposure to the Desi culture, perhaps you came across some islamic concepts. Many of which are Christian Concepts. Such as God is the only true provider, that all fortune and prosperity comes from Him. That If something is meant for you, then you can't avoid it and if it wasn't for you then it will never be for you; and lastly Strive Hard and even when you are releaved still Strive Hard. Speaking of this have you come across the punishment for paying interest? This is only relevant to those who are feverant and anxious to please Him.

The point of this post isn't relgion it's, to find a subcategory of finacial instruments.

As I've been on BP I've learned the culture here is to conquer limiting beliefs, don't wait to buy buy and wait ( also can be read as go out and get it and don't take the easy path). Most importantly, seek the counsel of multiple knowledgable parties and not take the first opinon. These all resound strongly with me. I greatly appreciate those reminders. These apply here as well. I won't limit myself with the belief that this path is too hard, or that it can't work. Just takes perserverance and research. Maybe some creativity. There are already 4 lenders which Ive listed.

Neither hve I hurt you nor you my feelings, we are men seeking to grow and find success; perhaps even in the next life. I'm sure a coffee and a BP book conversation and we would be able to laugh and talk for hours.

I present you another example. I noticed math is big in communication here.

Purchase Price is $260K, APR is 8% 30 years term $52K down. 20K Renovation, $2.6 residual rental; forced equity of 50K to $310K. My point is money made.

Now lets Sharia it! You partner for same price, same term, same down, same renovations, same rental, same forced equity. Point, money made.

I think this is the point that's more important.

So my next steps, find lenders that will partner with me in the terms I'm looking for. Beyond the ones I've already found.

The argument on if it's really interest or not, is not something I'll explain in detail. There are enough web articles, youtubes, and scholars to explain that. If anyone is interested I'll share those links. But again that's not the point here to explain or rationalize the religious institutions. I'm just looking for leads. Thanks BrotherCheers!

Adam Bartling · Answer

I am not busting your balls, and I even had a great relationship with my Iraqi contractors on my 2nd Iraq tour, I had 30 of them work for me.  People are people everywhere, we all want the same things basically.  But I have written these replies to keep you focused on your goals and not get caught up on an idea of interest being outside your religious beliefs.  In life you have to be flexible and keep your eyes open for opportunities.(morality & ethics should be present)

Another good example:

Charles Poliquin (he coached more Olympic athletes that anyone) one of his last conferences a lady in the audience asked him, about how he trains/ diet plan for elite vegan athletes.  Charles Replied, "There are No Elite Vegetarian Athletes"But you can do what you want.

Caroline Gerardo · Answer

Shared equity can do this BUT they own half of the house. Some fees are charged but not called interest they are servicing. Your client cannot remodel or sell or change to a living trust without paying them off.  Buyer puts half or more down.

Reverse mortgage can kind of do this- no payment is made. All payments due after you die.

Or a rich person at the mosque buys the house and you are a tenant of sorts for 20 years.

Jason Wray · Answer

R. Ali,

This is new to me as a Banker but may I ask why you might not want to entertain an FDIC Banks offer?  Would it be better rates and terms or is it more of a shared partnership and share in equity.

Fellow Investors, do you know of any Sharia Compliant Lenders?

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