private lending deals

4 Replies

Hi, I was curious about how to structure a deal with an absent partner who could provide funding.  Assume the partner supplies the cash and would like equity in the property.  If i go through the work of securing a deal that the partner likes, how would one split up the equity between us? Any examples of how other investors have done it.  Thank You in advance.


Sean O.

This really depends on many factors. If you are experienced and succesful enough you can demand as much equity as you want. In the beginning you probably need the investors money more than he needs you. Start off making the deal appealing to your investor and over time you can take a bigger piece. Ideally you get to a point where you are putting none of your own money into a deal and keeping a majority of the equity. 

Originally posted by @Sean Orourke :

Hi, I was curious about how to structure a deal with an absent partner who could provide funding.  Assume the partner supplies the cash and would like equity in the property.  If i go through the work of securing a deal that the partner likes, how would one split up the equity between us? Any examples of how other investors have done it.  Thank You in advance.


Sean O.

 It's pretty typical to provide the private money investor with a set rate of return of something like 8% until the deal sells and/or refinances their money out at which point the private money investor gets their money plus some percentage of the equity (most commonly 50% of the equity).

I have seen deals set up where one party provides all the financing on a rehab and upon sale the profit is split 50/50 or 60/40. This percentage can be anything the parties agree on and will depend upon how much risk the funder is willing to assume and how much risk you represent.  If you have a strong record of profitable deals the funder may be willing to agree to a smaller percentage of the profit. 

There are many deals where the funding party is actually making a loan and asks for only a percentage return on their funds. I have also seen deals where the funding party is given a small base return on their funds (maybe 5%) and will also receive a smaller percentage of the profit upon sale.

Sometimes you will find a money partner who will be willing to enter into one of these scenarios without requiring any funds from the rehabber but, most often, the funder will want the rehabber to have, at least, some funds in the deal. The better your record of bringing profitable deals to completion, the less risk you represent and the more likely you are to find money partners, the less capital you will be required to put at risk, and the larger share of the profit you can demand.

thanks fellas that gives me something to work with.

Sean O.

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