financing my 1st property
Posted 02 November 2004 - 11:04 AM
Posted 02 November 2004 - 11:30 AM
Now I am certain that there is an accountant out there who would propose that you should form a partnership, and return the equity stake to your partner over time by way of a dividend with a defined payout rate, but I and I'm sure most other credit folks would restrict the repayment of shareholder loans and or dividends until I received my $$ first.
Nothing beats unencumbered equity to getting a deal through.
Just my thoughts.
Posted 02 November 2004 - 02:06 PM
Believe it or not there is a possibility that a new analyst might be so concentrated on the specifics of financing the apartment building that the debt service for the private investorís debt might be overlooked. However, it is more likely that the debt will be counted against the rental income of the property and make the deal undoable due to inadequate debt service coverage.
Rick is right about his comments on subordination, that is very common in the corporate side as a way to alleviate lack of adequate net worth or high leverage. In the case of commercial real estate, you are safe from a capitalization problem with the mortgage lien and a loan-to-value ratio.
I would try to bring in the backer as an equity partner, and forming an entity to hold the real estate sounds like a sensible thing to do.
Take a look at my sensitivity analysis article in this site, it has a link to a spreadsheet where you can input the debt service of both loans and see if the property can repay.
1 user(s) are reading this topic
0 members, 1 guests, 0 anonymous users