Are you flush with great ideas and project possibilities but no cash? Find someone with money to invest and create a private equity partnership!

Sometimes even hard-money or seller carryback loans are out of reach because you don’t have the initial down payment they require to do the deal. However, that doesn’t need to stop you in your tracks, because there are cash investors out there who will take an equity position in your project to provide the needed financing.

Private equity differs from a loan primarily because a lender takes their profit in the form of an interest rate while a partner participates in the full returns (or losses) of the project.Lenders are guaranteed to reap the interest no matter what happens. If the project is a loser, they are no worse off. If the project has high returns, though, a lender is no better off, either.An equity partner joins for good or ill, suffering the losses but also benefiting in proportion to thegenerous profits.

A private equity partner can also provide the down payment that makes a hard-money or seller carryback loan possible, so there will be more available funds.A traditional bank loan with a lower interest rate may even be an option in some cases. These strategies leverage all the cash available to make possible larger projects than the partnership could do on cash alone.

Partnerships can be formed for one project or several.  They can be contracted for a specific length of time, such as the duration of the principal projects, or to last forever. This gives flexibility for partnerships to be organized for a few fix-and-flips, or for long-term buy-and-hold rentals.

The foundations of a successful partnership are:

• The right partners with solid values and a good work ethic as well as cash
• An excellent and flexible partnership contract.

A miss on either point leaves the partnership at high risk of a drama-filled implosion that best avoided in any lifetime. Despite all the best intentions, unanticipated events in the life of any partner can deal a heavy blow to the partnership from divorce to lawsuit to death. A solid contract will protect all parties and offer graceful ways of resolving such difficulties.

Private equity partnerships need to be thoughtfully arranged among partners of character and integrity and backed with solid contracts. Partners with cash can provide the means for greater profitable ventures, with or without additional borrowed financing, than any partner could do on their own. 

Where can you find investors with cash looking for partners to provide the time, energy, and expertise for profitable projects?

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