Pluses/Minuses of investing both the equity and debt on a home

[Scott L.]

Hi, I'm a relatively recent home flip investor. There's a property going for $200K where I've been offered an equity participation and optionally the debt side. Is there a good case for doing both equity and debt?

The house can be acquired and fixed for low $200K range, with good potential. It would be financed 70% short-term hard money, 30% equity. I would contribute 90% of the equity for 10% preferred and 40% of profits. I optionally could take on the hard money loan at 12%.

I'm not clear what the impact is t if I take both equity and debt. For example, if the developer (10% equity holder) becomes unavailable, what does it really mean that I am responsible to myself for the loan and for the rehab?

On the plus side, I think the property is low risk with 30%+ equity returns, and I could enhance those return on a single project with debt.

Thanks for thoughts,

SL