Some private lenders, including CoreVest, offer non-recourse financing for eligible real estate investments. This structure can help investors limit personal exposure while financing larger portfolios, but its protections depend on the loan documents.
With a recourse loan, the borrower or guarantor may be personally responsible for a remaining balance if the collateral does not fully repay the debt following a default.
A non-recourse loan generally limits the lender’s recovery to the property and other pledged collateral. However, non-recourse does not mean the borrower has no personal liability under any circumstances. Most non-recourse loans include carve-outs that may create liability for specified actions, such as fraud, misappropriation, unauthorized transfers, or certain bankruptcy-related conduct.
Some transactions may also include limited guarantees covering particular obligations. Investors should review the complete loan documents with qualified legal counsel.
Because the lender’s recovery is generally limited to the collateral, non-recourse financing may help protect assets that were not pledged to support the loan. The scope of that protection depends on the guaranties and carve-outs.
Non-recourse financing may help investors manage personally guaranteed liabilities as their portfolios expand. It does not automatically increase borrowing capacity or remove the debt from every lender’s analysis. Future lenders may still consider the investment, cash flow, ownership interest, and contingent obligations when evaluating an application.
Non-recourse debt can be attractive to partnerships, funds, and other investment groups because one principal may not need to guarantee the entire loan personally. This can help reduce disagreements over which partner assumes the greatest liability.
Non-recourse loans may carry different leverage, pricing, reserve, reporting, or borrower requirements than recourse financing. Before selecting a structure, investors should compare:
CoreVest offers both recourse and non-recourse options through its Rental Portfolio Loan program. Availability and structure depend on the borrower, portfolio, and transaction.
Contact our team to discuss financing for a rental portfolio.
This article is provided for informational purposes only and does not constitute legal, tax, accounting, investment, financial, real estate, or lending advice. Recourse obligations, guaranties, carve-outs, remedies, and loan structures are governed by the applicable loan documents and law. All loans are for business purposes and subject to underwriting, credit approval, eligibility requirements, and applicable terms and conditions.
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