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Updated over 7 years ago on . Most recent reply

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Kully Millage
  • Flipper/Rehabber
  • Denver, CO
4
Votes |
18
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If you raise capital but are unable to carry the bank note?

Kully Millage
  • Flipper/Rehabber
  • Denver, CO
Posted

Hello, my partner and I have around 13 single family homes and we are thinking of taking the next step into Multi Family.  I have been searching for private capital lenders for a little while and seemed to have gained a little traction.  I have my eye on a specific unit in my area costing around 1,250,000 and 1,500,000.  I think between one or two investors I should be able to get the down payment for that loan.  My question is, what if myself or my partner is unable to carry a bank loan of that size.  Do the investors carry the loan and get equity?  Or is there a third party that would consider carrying it for a percent of return?  Thank you

Most Popular Reply

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Brian Adams
  • Syndicator of Large Apartment Buildings
  • Glen Mills, PA
1,631
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Brian Adams
  • Syndicator of Large Apartment Buildings
  • Glen Mills, PA
Replied

@Kully Millage if you have some experience, can raise the capital to close a deal, but don't have the liquidity or net worth that a lender will require, than you will need to fill the void with a loan sponsor.

Most lenders require that the guarantor/loan sponsor has a net worth equal to or exceeding the loan amount and has 10% liquidity of the loan amount.

You can ask one of your investors to assist and sign on the loan or network and find someone to help. 

Going in you will most likely need to give a portion of your deal away to the loan sponsor as they are taking on the financial risk.

The "give away" is negotiable. Could be a fee only, cash flow, additional equity, back-end profit, management of the deal, or a combination of some or all.

Good luck!!

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