Private Money - Equity Partner

1 Reply

Hello All,

I am interested in learning more about bringing in a "equity partner" ( I believe that is what they are called) for purchasing a rental home.

There was BP podcast recently in which they discussed a technique of involving private money to purchase the home without any of the rental investors own capital, then give the private money lender a set percentage of all monthly revenue and then that same percentage in equity when the property is eventually sold.

Can someone shed some light on this?

I have the capital to do a regular down payment on a rental home, but them I am stuck at just owning one. I want many many more than one rental home and this seems like a great strategy in building a portfolio.

What kind of percentage would you expect to be fair for the monthly share, as well as the equity share when selling the home?

also,

How would one find this kind of private money lender?

Thank you all for sharing your knowledge. 

Sounds complicated. There are lots of things that are possible conceptually but difficult to implement. This is one of them. Complicated deals eliminate private lenders. Keep it simple. 

Study up on how an LLC in your state operate, then look at how an LLC allocates capital and profit/losses. If you can pitch to a private lender and explain they provide 90% of capital and get 10% (or whatever) of profit and future equity... more power to you. If I were the private lender, I'd say 90% capital and 90% of profit and 90% of future appreciation. It's high risk for a PL to foot your deal. In my world, rehabbers/flippers don't bring me these 90% so called 'deals', because I generally LEND 50% of acquisition and don't ask for any equity participation. It's not complicated, but requires a rehabber/flipper to have a significant stake... just like me.

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