Joint Venture with Seller?

[Timothy Doenges]

Good morning! Not looking for legal advice, just asking about experiences.

Has anyone here ever done an off-market deal where you JV with the seller? I'm looking to finance a 5-plex with a HML but the lender that works in my area doesn't allow second positions. They are willing to do 80%, and the seller is willing to finance up to 30% (but not the whole deal).

The HML did say they would allow JV with the seller instead of owner financing, since the owner wouldn't get a lien in this instance. Have any of you done this?

If I had a preference, I'd love to do a 80% HML / 20% owner contribution as a silent debt partner in JV. I would match the terms for the HML to the owner in JV, with the intention of refinancing ASAP. Since we are buying at about 65% of value and there is room to both raise rent and lower expense, I'm not worried about the hit to cash flow caused by the HML.

Thanks, BP!

[Pavan Sandhu]

when approaching lenders, it's about positioning. how you word things can go a long way. the seller is your partner on the buy side and is contributing with capital. maybe create a simple entity, throw the money in a joint business bank account and finance the project under the new entity. get creative.