How do find private lenders who do equity sharing

Question

How does one go about finding private money with an equity share component? I'd like to start buying larger deals, and am interested in connecting with lenders who are happy to enter using an equity share model with a split of the proceeds upon sale/refi.

Is that even possible?

Minh Duong · Answer

@Anupam Banerji I'm a broker, and I do have a few lenders across the states that do equity share depending on the deals. It's deal by deal basis, but they're willing to get about 25% to 50% equity with up to 90% LTV in funding.

Anupam Banerji · Answer

@Mike Grudzien what kind of relationships are we talking about?  People with money?  Then, the answer's no.  I do have friends, but they're not the people I'd ask for money.  Neither would I ask work colleagues.

Were you referring to business partners or some kind of networking?

Mike Grudzien · Answer

Are you able to network locally in your market to establish real, live relationships?

Mike Grudzien · Answer

No, not friends, network locally in your market in real estate investment groups, perhaps a local chapter of Real Estate Investors Association.

Anupam Banerji · Answer

@Minh Duong sounds promising!  I'll add you as a potential contact when we identify a suitable deal.

Jeff S. · Answer

Profit splitting is not normally in your interest, @Anupam Banerji.  You should run the numbers before you agree to anything like this.  You’re not clear on what you’re doing, but assuming typical hard money rates of 11% interest only plus 2 points on a six-month flip, the lender will end up taking between 25% and 33% of the profit.  With experience, these loan terms should be obtainable.  Why would you give a lender more?

Unless your circumstances are extenuating, 50/50 profit splits or sharing —which you occasionally see house flippers offer here—make no sense.  It makes even less sense to both borrow money and share profits. Who are you working for?

I don’t know what “… skin in the game but not the entire down payment,” means.  If you're considering this because you don’t have enough for a down payment, you may be undercapitalized and might consider waiting until you're better funded.

Anupam Banerji · Answer

@Jeff S. Thanks for that, but I was wondering if there's a route in for larger deals without pursuing the syndication route.  There are vehicles such as bridge loans, but my question was actually if anyone would provide a portion of or all of the monies for a reasonable rate of return plus an equity share.

Anupam Banerji · Answer

@Chris Seveney will you consider urban properties where I can provide skin in the game but not the entire down payment?

Chris Seveney · Answer

We have done equity shares in the past. The way we have done them is there is still a loan on the property and we also get equity upside

so one day we did was 10% interest only and 50% of the profit at the end

Chris Seveney · Answer

the deal i did they put in X and we provided the remaining amount because it was rural and could not be financed by institutional - but yes what you are saying is correct

How do find private lenders who do equity sharing

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