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| Very interesting. I think I follow, but we don't offer that piggy back product and I really dislike it personally. Your friend sounds sharp, so I could see a local lender taking a nibble (sometimes it's betting on a good person). Hard for me to see any lender letting a guy build a real estate empire this way.
Cross-collateralization is okay so long as sources of repayment are very strong and stress tested. Generally these are bigger lines, so more robust credit standards are prudent.
I'm not a fan of taking second position collateral on real estate but we still do from time to time. Bank has to be willing and able to buyout first creditor in the event things hit the fan. Often in real estate, paper equity vanishes broadly.
If I had to guess, your buddy is probably sharp, of good character, and has a proven track record. Likely other sources of substantial cashflow. Possibly other collateral to pledge. Glad it worked out for them regardless. | |
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Anybody following the commercial building loan crisis
