Raising Capital for a 100 unit complex, confused on something....

[Chris D.]

ok, so i am a little confused on this raising capital for a down payment, maybe someone can explain it to me how it works. There is a 100 unit apartment complex for 6 million. I would have to put down 25%, so I would need 1.5 million when i get a loan.  So my question is, how are you guys structuring theses deals when you raise the 1.5 million from other people.  Do you raise the whole amount (1.5) and take a percentage of ownership? what percentage if im not using any of my own money?  Or are these people giving you money as a loan and just paying them back a % at a whatever length amortization?  (so more or less you are 100% financing this deal).  Or am i totally off and there are other ways of doing this?  I appreciate the input, as i would like to raise capital asap.  Thank you.

Chris

[Kit England]

I think that the most common method or raising that capital would be on an equity share basses based on investor contribution. The 'general partner' usually receives a percentage for managing the investment. You, as that managing partner can basically structure the offering however you want but if the percentage left for the other investors isn't attractive enough you won't get the number of or kind of investors you may prefer. The lender is probably going to require you to included the amount required for improvements and a reserve into your calculations for the loan request. That and closing costs are likely to increase the 'all-in' sum considerably. Additionally, the bank will probably require one or more of the investors to have a substantial amount of liquid assets in their personal balance statement at the time of closing. More often than not this would be the general partner. Sometimes one or more of the other investors would have these additional assets. When that happens it's often the case that those investors will receive an extra percentage of the deal over and above their direct investment.