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Financing for Flex Space Commercial - investors
$2.5M 45,000 sq ft. 25% down. I am the primary investor.
Question:
If I take on two investors at 12.5%...can I avoid them having to sign the note and getting vetted? They are more than qualified, just don't want to go through the vetting process.
Details:
Financing will be 75% ltv, 5-10 years fixed, 25 year AM. Not sure of the rate in the current environment. Negotiations are in final stages of contract edits between the attorneys.
Open to any useful advice.
The limited partners don't usually qualify for the loan, the general partner does.
Matt - it depends on several factors.
As Aurelien Bonin mentioned above, if they are limited partners (passive investors) they typically are not included on the loan. However, if they are truly passive investors, are you structuring and documenting this as a syndication?
If they are not passive and are in fact active members of the general partner structure, then each lender will look at their specific criteria such as:
Do you have credit, net worth, and reserves to meet their underwriting criteria?
What is your experience / track record with this type and size of investment?
Most lenders will require any partner with 20% or greater ownership to be on the loan docs, but I have seen occassions where lenders pushed that requirement down to 15% or even 10%. Depends on the lender and what risk factors they perceive.
You state that financing will be 75% ltv, 5-10 yr fixed, 25 yr am. Do you have a lender commitment for that or is it your target? If you don't have a firm commitment, how will you handle a less desirable loan? What will it do to your investment plan?
Hope this helps. Let me know if you have questions and I will send a DM with my contact info.
Quote from @Brad Hayden:
Matt - it depends on several factors.
As Aurelien Bonin mentioned above, if they are limited partners (passive investors) they typically are not included on the loan. However, if they are truly passive investors, are you structuring and documenting this as a syndication?
If they are not passive and are in fact active members of the general partner structure, then each lender will look at their specific criteria such as:
Do you have credit, net worth, and reserves to meet their underwriting criteria?
What is your experience / track record with this type and size of investment?
Most lenders will require any partner with 20% or greater ownership to be on the loan docs, but I have seen occassions where lenders pushed that requirement down to 15% or even 10%. Depends on the lender and what risk factors they perceive.
You state that financing will be 75% ltv, 5-10 yr fixed, 25 yr am. Do you have a lender commitment for that or is it your target? If you don't have a firm commitment, how will you handle a less desirable loan? What will it do to your investment plan?
Hope this helps. Let me know if you have questions and I will send a DM with my contact info.
Thanks for the thoughtful response Brad. The bank indicated that I can do the loan on my own (net worth, experience, ext.). It will just be easier on the cash out of pocket to bring on a few investors. And they bring a lot of business experience that I would value, as there is an active component to the property that will need to be managed. The investors are older and don't want to go through the vetting process if possible. Not a syndication, but I am telling the bank that the investors will not be actively involved with decisions.
Hey @Matt Concannon, checking to see if you were able to put this together? Would be interested in hearing an update.
Brad....lol...only 12 months later. Yes...bought the building. Actually been so busy running the building, that I have not been on. To the original questions. I had two investors at 12.5% each (a husband and wife) who did not need sign the note. Another investor at 25%...did sign the note. I own 50% with my wife. Project is going well....projecting almost 10% cash on cash return for first 12 months. That should skyrocket to 30% cash on cash return for year 2. With potential for more.
Quote from @Matt Concannon:
$2.5M 45,000 sq ft. 25% down. I am the primary investor.
Question:
If I take on two investors at 12.5%...can I avoid them having to sign the note and getting vetted? They are more than qualified, just don't want to go through the vetting process.
Details:
Financing will be 75% ltv, 5-10 years fixed, 25 year AM. Not sure of the rate in the current environment. Negotiations are in final stages of contract edits between the attorneys.
Open to any useful advice.
Hey Matt, well done sir. Would you be willing to share the lenders info with me? Looking at a similar deal now.