Tuesday, May 15, 2007

Fractional Loan Application In Progress

Catching up with my building partners after my vacation, I have been told that our fractional loan applications with Sterling Bank are being reviewed by the underwriter. We should find out within a week if we have been approved. One of our six partners decided a few years ago to make a career change. So for the past three years he has been in school full-time, while his domestic partner has helped pay his mortgage. Of course, even though in nearly seven years no one in my group has ever been late with a payment, from the bank's perspective this makes for a bumpier road to closing the new loans.

This raises a few questions that any existing or prospective TIC owner should consider. How might your group manage when one of your partners goes through this kind of a life change? Any partner who was your financial equal or better at the outset can later make a decision that may negatively impact your group's financing options. You can't have a clause in your TIC agreement that says "don't send your children to private school" or "don't pursue your dream of an alternate career."

Also, for an existing group, there are still dependencies among partners when you are making the transition from a group loan to fractional loans. All the loans must be financed through the same bank, and all your applications move through the process together. What if one partner's application does not make the cut?


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