Structuring a Down Payment Partnership

[Wendy Carpenter]

I’m trying to figure out the best way to structure this deal, and also the best way to present to the bank so I look like I know what I’m talking about instead of fumbling around like a doof.  

Currently, most of my RE funds are tied up in another project. However, I’m making an offer on another property today. Should my offer be accepted, I have to get a little creative with my financing strategy. 

Because my partner and I are low on liquid as of now, we are considering bringing on a partner to fund the down payment of this property. But, we would like this partner to be in this solely as our “lender” for the down payment. So, she supplies the down (with interest on our payments to her), but she is not an “owner” of the property. When we get our funds out of our other project or we refi, we would pay her off and her part in the scenario is done. 

Just as an FYI , this is a commercial property. 

Any thoughts or strategies on this situation? Also, will a comm lender go for this? (Property is only about $325k, so this isn’t a multimillion dollar deal)

[Bill F.]

@Wendy Carpenter do you and your partner have a relationship with a local banker? If you did, I'd ask them. 

You described getting a second loan for the down-payment. As long as you are up front about this to the bank and their loan is still in first position, it is just a matter of find one that feels comfortable with this set up. 

The issue I see is that the bank will still want to see a DSCR of 1.2 and that could get tricky with what is essentially 100% financing, but I'm sure there are exceptions and work arounds that I don't know about.

Is there a value add play for the property or is your lender willing to take deferred payments or IO for a period of time? That could help with the DSCR.