Does partnering on real estate deals hurt your bankability?

[Mark Costa]

Hello BPers,

Thanks to the advice and inspiration from these forums I am now at the point where I would like to partner on some deals. Because these deals are relatively small, I assume they will be recourse loans. If we take out a loan together on a property, does splitting the income while each assuming joint and several liability escalate our respective DTI ratios fast enough to quickly disqualify both partners from future recourse loans?

If partnering does affect the DTI negatively, how do other investors handle this situation?

[Michael Pearse]

@Mark Costa Obtaining a recourse loan with another investor won't slow down your growth rate, even with fluctuations in DTI ratios. Many times banks will start to count rental income as fixed income (usually around 2 years of solid rental return), which will further reduce your debt liability. I am sure you will make smart investment moves that will produce positive cash flow. Hence you should not run into any issues. 

Work with a small local bank and inform them how you and your partner plan to create sustainable, positive cash flowing properties. Have a solid business model that is well thought out. This will build trust over time with your loan officer and allow for more creative loans when the right time is needed for getting the next big investment deal.

Best of luck!