How much equity does one ask for?

[Julio Velazquez]

Hello BP,

What percentage of equity is ok to ask for when presenting a deal to an investor? If I want to partner with an investor and not just get a finders fee for the deal.. is 5, 10 or even 20% equity what someone usually asks for?

[Evan Polaski]

@Julio Velazquez, as @Indro Dhar mentioned you might be asking the wrong question.  There is a certain amount of money needed to buy the deal, add in any reserves that need to be funded, operating cash that isn't handled in the loan, cash needed for immediate capital repairs, etc.

This should be a known number in your underwriting.  From there, figure out how much you have for the deal, and the difference is what you need to ask for.  But it does not need to be all from one person.  

And before you get too far down the road, a lot of loan covenants mandate that anyone with 20% or more ownership has to sign the loan docs, so you will typically find that most equity investors won't want to cross that threshold.