All Forum Posts by: Benjamin Nguyen

Henry: I sent you an email, let me know if you still have any advice. I appreciate the support and will certainly report my findings if this ever gets done!

Jon: Welp, I'll try, right? I've "heard" of others structuring similar deals but when I try to investigate further things seem to disappear or the deal ends up finishing behind closed doors. I guess that's the problem with the internet right? I really think the major issue is trying to guarantee this loan by myself without having the partner have to sign for recourse. In that case, the 50% equity I'm bringing is both recourse protection and 5% down. I mean, by your same logic the partner is putting up 25% cash for a 50% cut, it's not a tit-for-tat measure. However, I appreciate your critical eye as it helps me truly think "creatively".

I'd like to be able to give the partner a good deal, even if it's unfair for me. Perhaps something interesting would be to ask how any of you all would go about this as my potential partner. Would you want a lot more equity? Would you want to have all payments/profits go towards recovering your down payment first? Essentially, what would you want if I was offering this to you?

If anything, even if I can't get this deal done it will bring about some interesting scenarios to spur other creative ideas for future use.

Joe: No, I can provide about 5% of the funds, sorry forgot to mention that! So I can help pay for closing costs and other fees from the loan's funding. Also, I am absolutely wanting to give my personal guarantee. In fact, I don't want my investor to have to guarantee anything at all to the bank! That's why my question on #2 is how can I create a deal where the bank only needs me to sign as the guarantor but also give 50% equity to my partner?

Wayne: Agreed, and I thought about this as well. So that's why I'm here trying to think of ways to make something like this work. I didn't think about paying the partner their share fully first. That sounds like a good way to perhaps entice them to front the money. Have you done a deal like that before? If so, I'd love to hear how you structured it.

Henry,

I am not the person you are thinking of. I don't know who you are haha.

At any rate, why not just give some tips/pointers here on the forums out in the open? I want to help others who may also be in my same situation so we can all learn together.

Thanks!

Hi everyone,

I'm new to the whole JV thing and I wanted to get some ideas on how (or if) this could work out. Basically, I'd like someone to come in to give me a 25% downpayment and I would give them 50% equity. However, there's a few problems and hopefully you all can help me out. Here's some basics:

1. The property is a $2.9 million acquisition with no problems and 95% current occupancy. The previous buyer bought it 2 years ago and dumped money into it.
2. The net operating income is $300k/year BEFORE debt servicing. Cap rate of 10%.
3. I have been quoted a loan from my local credit union for 75% LTV and 4.5%-5% interest with a 25 year amortization. There is a balloon/refinance at 5 years. The loan is a conventional recourse loan.
4. Calculating all that together, the cash flow after debt servicing assuming 5% interest would be just under $150k/year.
5. Again, I would like to give an investor 50% equity if they gave me the 25% down payment.

Now, let me list the problems I feel like I'm running into:

1. How do I even get started? I see people wanting to "JV" all the time but I don't even know how I could set something like this set up. How would it work if the partner wanted to pull out of the investment before it's been totally paid up? How would it work if I wanted to make extra early payments towards principal? Does that equity get split to the investor? Does anyone have a recommendation on a boiler-plate plan?
2. It's a recourse loan. The bank wants anyone with 20% or more equity to put their name down as a guarantor. I would love to be able to simply guarantee the loan by myself in order to protect the investor. How do I get around this and still legally give them 50% equity?
3. I'm new to the game. I plan to hire a management company or full time on-site staff to run the property. How do I convince investors that I can do this? Should I give them more equity?
4. Is this enough equity to give a partner for the deal at hand? Can I entice the deal more by giving them more than 50% of the cashflow in addition to their equity?
5. What happens at that 5 year balloon/refinance if we can't come to an agreement on what we should do? Or in fact, what happens if we can't agree on any matter at all? They own 50% so I'd assume they get 50% of the "say".


Honestly, any tips or ideas would be appreciated. I think this is a very straightfoward acquisition without any need to risk flipping or improving the property. I would love any ideas on how I can get this done.

Thanks in advance!