Updated almost 4 years ago on .
Ideas on how to offer equity instead of a flat % return?
We are raising approximately 600K for a commercial project. The estimated ARV on 8% cap rate for this building is 1.4 million. So there is plenty of cushion for lenders and its a very strong deal.
In the past, I have always offer my private lenders a flat 10% return. Simple and easy.
10% excites some people but not everyone and I am trying to come up with partnership ideas for an investor who is willing to invest a large sum in return for a piece of the pie.
What are some ways to structure this? I was thinking something like 5% interest and a small equity position. But I am not clear on how a lenders equity position would be valued after the new appraisal? For example, if I offer 5% equity, does that mean they own 5% of the new appraised value and cash flows?
Some ideas would be helpful