How do you structure your private investor financing?

[Cassandra Sifford]

Good evening BP! I've found a few good deals off market and am interested in private investors. I've talked to some people who may have money that they want to invest in real estate, but I'm looking for some ideas on how to structure/negotiate. Would you mind sharing some of your successful financing options that you've created with your money partners? ... Thank u much!

[Marco Bario]

@Cassandra Sifford - It always seems that when someone finds good deals, money will find them. Congratulations. 

In a real estate deal, there's what's referred to as the "capital stack." Within the capital stack, there's debt (loans) and equity (owners). A simple capital stack might look like:

70% - Debt

30% - Equity

Investors can come in on the debt or equity portions of a deal (or both). 

A few common scenarios are:

1.  Private Money Lender (Debt)
2. Joint Venture aka JV Partner (Equity)
3. Equity Partner (Equity)

When you ask for a loan and the investor is secured by the property as collateral it's straightforward. When you ask for investment in exchange for equity there are securities laws that come into play and more risk taken on by all parties involved.