Joint Venture Partners
Much more detail will be spent on this topic in the Funding Your Properties – Joint Venture Partnerships course, in particular on equity partnership. For now you need to keep in mind the big picture and the part that Joint Venture partnerships can play in funding your deals. In this section of this course we will focus on debt partnership.
This is where a partner would provide money, financing, or expertise and be able to own a percentage of the property. This ownership would take the form of an equity stake in the property, as well as a percentage of the cash flow after expenses. Although, both of these could be negoitated independately. For example, a partner could provide money and financing take a 60% equity stake, but only take 40% cash flow.
The difference between a debt partner and an equity partner is that a debt partner makes a loan to you and has a set payment, and does not get any of the profits from the property. This could be in the form of money for the downpayment, or even as a first mortgage on a property. You could possibly borrow 200,000 @ 6% interest only payments, which would act as a first mortgage on a property.
A credit partner would provide financing for the property based on what they could potentially qualify for at their bank or lender. They would provide mortgage financing on the property for an equity stake in the property, but not provide any funds into the deal at all. Paying someone a flat fee for getting a mortgage for you is illegal in Canada. So offering them an equity stake, and a cash flow percentage of the property would be acceptable. You will need to do your own negoiatations but some investors offer between 10-25% equity and cash flow stake in a property for providing the mortgage financing on a property.
A hybrid partner takes some credit, equity and debt partner qualities. The partner may be taking a set percentage on the debt portion of the property, but also has an equity stake in the property.
For example, a hybrid partner might provide the downpayment and get 5% simple interest on the money provided like a debt partner would. But this partner also wants to partcipate in the property upside and they are great to qualify for the mortgage. So you give them 20% of the equity and the cash flow.