Where to find equity partners?

30 Replies

Can anyone point me in the right direction to find a long term equity partner?  I'm looking for somebody who would like to either loan me 100% for a 30yr term at 1% interest plus receive a 10% equity or fund 100% of deals and receive a larger equity stake.  I want somebody to fund up to a certain amount, $100-$200mil preferably, yet want to offer equity on acquisitions picked up after that amount is met and future real estate relate businesses, such as construction and staying companies as well.  I'll handle rehab cost, management and yearly expenses etc...and would like to build a nation wide company consisting of low income-luxury buy and holds, fix and flips, commercial, development and eventually branch out to vacation rentals as well.  I have an initial list of currently available properties clustered in specific areas, mostly Massachusetts, that are turn key and cash flow positive, minus some development, consisting of $260mil worth of real estate.  I'm not necessarily looking to purchase all the properties in one go but would like to start with at least $5mil for the first set of acquisitions.  I have the vision for how I can grow this very quickly and get some huge returns, I've run the numbers and I'm ready to go big on this.  I just don't know where to find deep pocket investors that would be interested in this type of arrangement.  I know this is a bit long just trying to explain my plans as best as possible.  Thanks for any help you can provide!

Thanks Joe, unfortunately there isn't an reic I've found in my area.  To the best of my knowledge the closest one is approx. 1 1/2hrs away 

I would definitely make the drive and network. From my experience, if someone is funding 100% of the purchase of the property as an equity partner (they won't underwrite you, just the property) then you're going to have to give up a lot more than 10% and 1%. If you have no skin in the game, you'll usually start at 50% equity and work your way from there depending on what you can offer.

But doing 10 deals a year with a partner is much better than doing 1 or 2 deals on your own. just be open and flexible to make a deal that's mutually beneficial

Not sure if the REIC is the right place to go for that type of money. Many experienced REI wouldn't throw down $5m unless you had a previous relationship with them or track record making money in those sized deals. They probably prefer a more active control of their investment or are probably doing deals on their own. Your asking for people to cough up a few million bucks so you would probably need to rely on your own network.

Agree with @Robert Sepulveda  , 1% interest plus 10% equity is not very attractive from an investors point of view.

I think giving somebody 50% equity plus repaying the loan is incredibly steep when I would cover all additional expenses and construction expenses and give them equity in all future acquisitions that they put nothing into plus additional future real estate related business.  Do you guys really think that's what investors are looking for?  I don't see how a business can ever grow with giving that much equity away.  I would offer 50% if an investor put in 50% of their money and I financed 50% from my other lender connections but I don't see giving somebody 50% for a loan as a fair deal.  Can I ask you guys what you would offer if you were in my position that would make a long term arraignment fair and appealing for both sides.

That's a lot of money. I think you'd have an extremely hard time attracting that unless you had a decent sized company with years of experience managing big money. At least you are on the East coast where there is money.

Yes I know it's a lot of money.  I have a business proposal to send to investors which says in it I'm open to starting as small or big as they're comfortable with and list a couple different financing suggestions and equity splits.  I can, if needed, obtain 70-80% financing so I have a few different ways I can structure things.  I would just prefer if in partnering with somebody to have them getting the interest, at 1% for 30yrs on the total amount of the $260,000,000...which not all the deals would go through and come down to the prices I want so that number would drop a fair amount...but at the $260mil interest alone is in the ballpark of $43mil.  Above is more my ideal scenario 

This is a joke right, why would anybody write a check for millions for a company with no track record. How much are you putting up for the 260 mill deal ?

I can get 70-80% financed if needed through my lender connections.  I'm also not looking for somebody to write me a check but purchase properties with me so they have they would have ownership of the properties as well.  I'm also not looking to buy $260mil worth of property at one time, it could start with a property for $50k, I though ideally would like to start higher to grow faster.  I'm simply leading with my perfect scenario above as an example of what I would like to do so I can get possible suggestions on where to find investors who have the capability to do that...not necessarily all at one go 

The best way is to find the deals, put some cash up and equity partners will find you. 

@Brittany Moreland  

  ambitious I will give you that. and totally unrealistic... folks with that kind of money don't need you they do it themselves..

Good luck on it.  but I would set your sights a little more in line with reality so you can at least get off the ground..

Brittany,

If you are looking for a local REIA go to MeetUp and search Western Mass REI Club. One just formed and has a meeting Tuesday night at 7pm (Feb 17).

Regards,

Bob

How many deals have you done?  How much of your money do you have to invest?  How long have you had your buy and holds?

The way you phrased you opening questions - "I want somebody to do X" seems to come from an inexperienced person.  I wish you well but I think you should start a little smaller than $260 mil.

Tom

Thanks Bob, I'm sending you an email in a few about a couple things.

Thomas, I work with mainly investors but haven't invested in real estate myself yet.  Yes I am inexperienced when it comes to investing.  I'm not looking to start with $260mil, I would love to start with $5mil which I can if a partner wanted me to finance 70% separately from them.  The $260mil is simply just the value of properties that are currently in select counties I want to focus on to start so I put that number as more of an example of what I would ideally like them to contribute funds or fund fully up to but things can go at a pace as investor that wants to team up wants to go.  I mainly just want to know a good way to find investors who want to do something similar to what I want to do and have some funding in place.  Ideally I want them to get interest off any loans I take out as well so somebody I'm working directly with gets interest from me instead of somebody I don't know.

I would suggest starting small as you suggested was a possibility. Start your purchases one at a time and possibly with multiple partners. Then after establishing a company and establishing actual cashflow and not just having it on paper, you could then try and find a partner who will come in and purchase the portfolio from you and your partners, you can pay off your partners and then start new with this single partner and move forward through the rest of the plan.

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Thank you Michael that is a fantastic suggestion.  I didn't even think about the possibility of buying out partners not looking to go in the same direction as I'm looking to go into the future once I have things up and going.  

Thank you very much Robert for the name suggestions.  I didn't know Peter Picknelly was in real estate but I have mutual contacts with him and when the weather's warm enough walk by his house a few times a week.  I have mutual contacts with Evan Plotkin as well so will see about reaching out to those two as a start.  

@Brittany Moreland  

I agree with what others have been saying. I don't think you are going to find equity partners with that kind of capital on the terms you are asking for. 260Mil @ 10% equity gives you a company valuation of 2.6B. Every watch Shark Tank? What about "The Profit"? They all will tell you that they are putting up all of the risk. 100% funding? Why would they put up all the money and take all the risk for 10% equity? At the price points you are talking about I'd be very happy GETTING 10% for myself.

What is it that you are bringing to them? Just a list or propeties? I'm sure they can find brokers who can find the same or similar properties.

I hope you can make something work but I agree with others that you should start smaller. Maybe in the 500k - 1M range and build up a track record of producing results and profits. Then you will be in a position to start negoatiating bigger deals. Good Luck!

I'm not looking for $260mil, I would like a partnership with somebody where up to a certain point...I used $260mil as an example...they cover purchase cost or contribute 20%+ to the purchase cost and then once we reach an agreed upon price point I fund everything 100% yet they still get equity on future acquisitions.  My best funding I can get is $2+mil and requires 20% down so ideally I'd like a property that fits into that category so I can use my best connect or a partner loan me money on similar terms to my preferred financing contact starting at any price point.  Basically my whole point was where can I find a long term partner who wants to go in the same direction as me since many of the people who I can partner with on deals see a different end game from what I want to do.

Originally posted by @Brittany Moreland :

I think giving somebody 50% equity plus repaying the loan is incredibly steep when I would cover all additional expenses and construction expenses and give them equity in all future acquisitions that they put nothing into plus additional future real estate related business.  Do you guys really think that's what investors are looking for?  I don't see how a business can ever grow with giving that much equity away.  I would offer 50% if an investor put in 50% of their money and I financed 50% from my other lender connections but I don't see giving somebody 50% for a loan as a fair deal.  Can I ask you guys what you would offer if you were in my position that would make a long term arraignment fair and appealing for both sides.

I've been try to find an equity investors to help fully fund a motel of $2.5 million and have been offering the terms of 75% equity invest for investor leaving me with 25% would this be a good deal for an investor.

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I've been try to find an equity investors to help fully fund a motel of $2.5 million and have been offering the terms of 75% equity invest for investor leaving me with 25% would this be a good deal for an investor.

If $2.5 million is 75% of the cash going into the deal, this is potentially a good deal.   Of course, many other factors have to line up to be a good deal.

OTOH, if $2.5 million is 100% of the cash into the deal, 75% of the equity is much too little.  If I'm putting in 100% of the capital, I expect something very close to 100% of the equity.

When you're talking about millions of dollars  in cash being handed over, this sort of large scale investment would most likely require a private placement memorandum. Check your state laws as I'm more familiar with New York. But a ppm can cost anywhere from 5 to 20 thousand dollars. I would just accept that this needs to be a small scale operation involving close friends and family until you have some tangible experience and significant capital of your own.

Ricky are you planning to repay the $2.5mil?  Are you going to do a cash out refi in x amount of years to pay off investors and than switch equity stakes around?  I have 1 group I've teamed up with and working on putting some deals together with.  If they're funding a deal on it's entirety that I'm presenting to them I'm asking for 10-20% net profit and I'm managing it for 18-24mos then doing a cash out refi to repay the investment plus and switching equity stakes...for smaller buy and holds like multiple single family rentals.  Larger buy and holds I bring 75% financing so in order to repay the loans and build the equity I need to take 80% until the cash out refi to pay them back with a high return.  

Depends on your role and exit strategy for them.  

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