95/5 Equity Split

6 Replies

I am currently purchasing a multifamily building in California. I have found a small investment group looking to provide 95% of the equity and I would provide the 5%. I just wanted to know if anyone had experience with this structure and how would the escrow of funds work. Would we both submit to the title company or will the investment group just wire me the funds and I sign a contract stating the funds are for the purchase of a property? I am sure they will want to do it a certain way, but I prefer to do it in the right way. Anyone familiar with this? Also part of the funds include paying down closing costs and legal fees, so I would need access to some of the money to close. Any other additional comments regarding the closing on this?

@Jimmy Klein

This was a very common arrangement back in the 80's were home owners that had 50k to put down but could not qualify would be matched up with credit worthy investors. they would buy a SFR as owner occ. then have an agreement to sell in 3 to 5 years and with rampant appreciation that the BAy area experienced it was a great deal for all. YOur deal is the same I would suspect

@Jay Hinrichs

Yes, same thing, but my deal is commercial instead of single family. I know the 95/5 equity structure is common. I was more curious to know about the funding process works, if someone has been through it. Or working with institutional equity providers in general.

send 2 wires to the title company.Taking money without coming from closing could get you into trouble. I did something similar(I think) and we had three wires to close one deal butit worked well.

How about setting up a bank account, funding it upfront, then use it for outgoing and incoming money

The seller will want you to open escrow with your 5%, and the investment group will wire the 95%.

Joe Gore

@Jimmy Klein - do it all through an escrow account - don't wire any money to you personally.

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