Equity Partners? Help me understand?

[Account Closed]

Hey BP Community!

I'm trying to learn about RE Investing. I'm 14. I've heard the term "Equity Partner" a few times recently. I don't really understand how Equity Partners work. Can someone please explain this to me?

Thanks,

Kedus Meheretu

[Chris Martin]

You are starting at the right age!

An "equity partner" will have an ownership stake in the deal. Generally an equity partner provides only financing and not day-to-day management responsibilities. A "debt partner" will also provide financing, however will have a lien on the property/company but no ownership interest. There are also more complex hybrid structures involving convertible debt, where liens can convert to equity interests. Equity splits would be spelled out in the operating agreement. For an LLC, the individual member's share of the company is reported on line J of Form 1065 (the K-1). http://www.irs.gov/pub/irs-pdf/f1065sk1.pdf