Equity partnership structures

2 Replies

I have a few large buy and hold properties I'm interested in and I have connections for the funding with 20% down.  I don't have the 20% down but have had 1 investor mention an equity partnership and have 1 other investor I would like to approach with the idea as well.  What is a mutually fair structure for an equity partnership if they're putting 20% cash and I'm going in with 80% financing?  I would guess the one putting up cash is going to want more than 20% return.  I also want the partnership to only be on deals that they put in the cash for not with every investment deal I do and I'm not sure how that tends to work with real estate.  I would like to present the partnership to both of these investors with all the details in place as I would like them and see who's the best option to move forward with.  If you have been on either side of this situation I would live to hear your thoughts!  Thank you

Hi Brittany,

There is no right answer to this. People do deals in all sorts of ways.

The amount you have to give away depends largely on your track record and your investor's goals. I know that's not an answer, but there you have it. 

This might be a prime example of you doing the work, the investor bringing the money, and you split the income 50/50. 

The reality of real estate investing is that it's a team sport. If you're working alone you'll run out of money before you run out of opportunities. To be really successful, you'll probably want to leverage the power of OPM (other people's money).

Come up with a structure that will make your investors (yes, both of them) happy. Don't play them off of each other, instead give them both opportunities to make money. The best possible outcome is that they come back to you and want to give you more money.

Thank you very much.  Do you think offering 30% if they contribute 20% sounds fair?  I'm brand new to investing, getting ready to offer on my first flip property and want to pick up a bunch of buy and holds.  I'm not looking to get a multi family here and there, I want my first deal to be a few million worth of property so I'll be asking them to chip in a fair amount of change.  I can get the funding up and am not afraid to get the finding up to $200mil but realistically I would like to aim for around $15-$20mil so really want to make sure I'm making a deal that's fair both ways if I'm asking somebody to invest $4mil.

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