Flipper/Rehabber · MD · Member since 2019 · 58 posts · 7 votes
Do investors accept a, say, 3-5 year investment term, which ends in a refinance, where all their capital, preferred return, and appreciation split are paid back and the investor-sponsor partnership is terminated? If so, would this give the sponsor sole entitlement to the cash flows and appreciation after that? If not, how do sponsor-investor agreements typically work after a refinance (for the sponsor's purpose of holding on to the property) if the investors are paid out from the refinance?
Totally depends on the deal. This is the type of thing that is decided beforehand. Most investors will want to keep their ownership on a refinance because they want the benefits of real estate investing just as much as sponsors!
A refi doesn't change the agreement. The refi is subject to the agreement.
It would be laid out in the Operating Agreement, typically I'd say the venture continues. Refinancing and repayment of capital is not grounds for winding down.