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Updated over 6 years ago on . Most recent reply

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Charles Curley
  • San Diego
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Raising capital for down payment

Charles Curley
  • San Diego
Posted

What are some ways people have and can raise capital for a down payment when it's pretty large? How do you go about paying those people back? Thanks 

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Thomas Castelli
  • Accountant
  • Long Island, NY
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Thomas Castelli
  • Accountant
  • Long Island, NY
Replied

@Charles Curley

You can raise money from friends or family and form a partnership where you are the general partner and they are the limited partners aka silent partners. They are paid a return (and eventually their principal back) via cash flow and/or from the sales proceeds when the property is sold. 

If the deal is big enough you may consider doing a syndication - which is similar to the partnership structure mentioned above except you are raising money from people you may not know as well. Syndications require a private placement memorandum (PPM), which can be costly and usually only make sense on larger deals. 

Alternatively, you can try to get a private money loan or ask the seller to finance a portion to reduce the down payment, but typically equity is the preferred method when you need funds for a down payment.

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