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equity partner


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#1 sandeja16

    Part-Time Teller

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Posted 02 November 2004 - 03:03 PM

refering to my 1st posting financing my first property

how would making my backer an equity partner effect the cash flow?
is it then the partnerships name that is on the mortgage?
does this put him at more risk?
to what advantage/disadvantage is this to him?

thank you for your imput

#2 loanuniverse

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Posted 02 November 2004 - 04:56 PM

how would making my backer an equity partner effect the cash flow? Debt has to be repaid, equity does not. When calculating debt repayment, a lender would not have to worry about the debt payments due to your backer.

is it then the partnerships name that is on the mortgage? Yes, but you and your partner will be required to guarantee.

does this put him at more risk? Quite possibly if he can not get out of a personal guarantee. There are certain tricks that could be used, but then we are talking about more legal feedback that I feel comfortable giving no matter how complete my disclaimer is. Talk to an attorney about this.

to what advantage/disadvantage is this to him? The disadvantage I see is the possible guarantee issue. You did not mention how this backer intended to secure his interest in your venture. I would think that at the very least he would have wanted a second mortgage. Also a 6% rate for a junior position with you not providing any equity of your own……well….. I have to guess that this is family smile.gif

Good luck





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