Partnerships to obtain higher loans

[Pete Perez]

Hello BPers!

I am currently building my investment team after reading several books on RE. I've begun networking and attending meetups to find potential partners and just network in general to find like minded people. I recently met with a couple lenders and found that given my income and credit they have approved me for $250k. I intend to venture into Buy & Hold with creative financing, and part of the creative financing piece will be to cash out refi to pay back my initial lender (either hardmoney lender or otherwise). Given the prices of homes in California I am thinking I will need a much larger approval amount from lenders, which is why I am actively searching for partners. 

My question is related to whether or not I can use a partner who has similar income and credit (or better preferred) to refinance and get a better approval amount. Can partners be on the loan together? Or does it have to be one or the other? Just had a question on the specifics of that process.

Thanks everyone!

[Gino Barbaro]

@Pete Perez

Hi Pete

I followed the route of partnership and it has made all the difference to me.  Just make sure you and your future partners are on the same page, i.e. buy and hold strategy.  When you enter a partnership, you need to have a written agreement and make sure you specify the duties and responsibilities of each partner.  Hopefully, you will each bring certain skill sets to let the partnership flourish.  And hopefully your partner will bring money.

Banks will require that partners personally guarantee the loan.  One bank wanted my partner and I to EACH guarantee 100% of the loan.  Needless to say we vehemently disagreed and agreed on 50% each.  Partners can bring so much to the table: energy, ideas, enthusiasm, a kind word to uplift you on a tough day and like minded goals.

I have formed LLCs for each entity with my partner and we draft operating agreements for each entity.  It's very important you hire a competent attorney and CPA to guide you along

All the best

Gino