REI Nomenclature Equity vs Cash vs % Ownership
I’m trying to sort out some finance nomenclature and how it relates in partnerships.
I understand that in a typical capital stack, when financing a property, you’ve got debt and equity.
For example, if you get an 80% LTV loan for a property that you buy at $100k, your debt is $80k and your equity required is $20k.
But, what if you get a partner? If the partner brings in $10k, does that give him or her a 50% equity position? What if I’m the one bringing the debt financing (the recourse is on me)? Does that give the partner a 10% equity position instead? That’s a big difference for putting in the same money. I’m just wondering how the industry recognizes these contributions from partners.
Also, does this % equity determine how profits and losses are split in a project?