BiggerPockets

Becoming an Equity Investor

Tuesday, January 27

Many established investors as they reach retirement age may be transitioning from a "hands on" investing style to a more passive investment approach. They may be looking to do less work and yet put some of their capital to work in other properties.

Minority Equity Investor

The current market provides a unique situation where investors with capital can make investments in existing commercial properties and reap large rewards by becoming a minority equity investor.

Many properties that were bought in 2006 and 2007 will not be refinanceable in today's market. This means that if their loan comes due more equity will be required to finance the property or the loan will be in default.

Backed Into a Corner

Many commercial property owners do not have enough cash to pay down the mortgage out of pocket.

Equity investors can leverage this situation to their advantage by providing the necessary capital in return for an equity stake in the deal.

The equity investor is providing the only alternative that some property owners will have to foreclosure.

Don't Get Greedy

Equity investors need to walk a fine line between asking for two much and giving away the farm.

If an equity investor asks for an exorbinant return, the current owner may be offended and walk away from the deal. At the same time the equity investor needs to safe guard their investment.

Commercial real estate investors should look for opportunities to provide this type of equity investment.

Comments

1. 

   Ralph Camareno Reply
   about 3 years ago

   Thanks for Becomeing an Equity Investor article. So where do I find an equity investor? Do a search on Bigger pockets?

   Ralph
   nulif628@aol.com

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