What is Debt Partner?

A debt partner  is an investor who is willing to put money up for a loan. They are not taking out equity, but rather a percentage of the return on their investment. They are incurring debt. This is similar to going to a financial institution and getting a mortgage. They will receive a promissory note from a debt partner outlining the repayment terms and the return on their investment. You can use debt partners for both commercial and residential property transactions. In the case of commercial property, your private money partners should cover all closing costs, the down payment, and capital improvements. The difference between the bank loan and the purchase price is the down payment. 

Our Debt Partners

Typically, our flip strategy involves a debt partner. They provide funding only for the purchase and renovation; there may be several lenders. Like a bank, we will pay our debt partners based on fixed interest rates for the money they invest; however, they won’t receive any upside equity from the sale of the property. Depending on the amount of their investment, they will either receive a first or second position mortgage. For the flip, we will have data such as comparable sales, so we can demonstrate the price at which we will sell the property; a list of items, typically something that needs some work; and perhaps some images of the property. We will demonstrate the required work, its estimated cost, and the price at which we plan to sell the property using comparable

Benefits of our Debt Partners

  1. Funding for projects: Debt partners can provide funding for real estate projects when traditional lenders are hesitant to finance or when the borrower needs additional capital to complete the project.

  2. Lower capital contribution: Debt financing requires a lower capital contribution compared to equity financing, which dilutes the ownership of the project or property.

  3. Fixed terms: Debt financing has fixed terms, which allows borrowers to plan their expenses and manage their finances.

  4. Speed of funding: Debt financing can be secured quickly, allowing borrowers to get the necessary capital to begin or complete their projects in a timely manner.

  5. No dilution of ownership: Debt financing does not affect the ownership of the property or project, allowing the borrower to retain control and reap the benefits of successful projects without sharing the profits.

  6. Reduced risk: Debt financing reduces the risk of losing ownership of the project or property in case of defaults or financial distress.

  7. Tax benefits: Interest paid on debt financing is tax deductible, reducing the overall tax burden of the borrower.

  8. Potential for a good return on investment: Debt partners can earn a fixed-income return on their investment, providing a reliable source of income for investors seeking steady returns.