… to read Equity and Joint Ventures – Understanding the Cost – Part 1 of 2 … click here
Understanding the Cost of Equity and Joint Venture Structures
Equity and Joint Venture structures admittedly come with costs that seem higher than traditional lending sources, however, when you consider the speed at which Equity and Joint Venture funders move and the high leverage (LTV) commercial real estate investors can obtain, all of the sudden the cost of the money becomes secondary.
Why? Because when one moves fast opportunity is created. The Cost of Lost Opportunity is associated with many factors; everything from not closing a deal that could make profits and create cash flow for having to pay more because of the inability to move quickly or because of the need to ask for seller participation.
The Cost of Lost Opportunity is completely eliminated when commercial real estate investors are able to move fast! Instead of losing valuable cash flow that can be create through aggressive offers with high cap rates, now commercial real estate investors can use Equity and Joint Venture structured financing to make low offers that close fast and get distressed assets off of lenders books.
Instead of having to pay more for property, by using money that moves fast, commercial real estate investors can move aggressively and make offers and price transactions in a way that essentially makes up for the cost of the money by purchasing distressed commercial real estate assets at lower prices. The equity created at the buy is the key and it creates a win/win scenario for the commercial real estate investor and the Equity and Joint Venture funding entity.
The Conclusion: Equity and Joint Venture Funding Structures Work!
In the final analysis, while Equity and Joint Venture financing seem expensive, it really isn’t. When taking into account the Cost of Lost Opportunity, coupled with the ability to move fast and get aggressive offers accepted, commercial real estate investors may find that the cost of the money is roughly equal to traditional financing.
In closing let’s add one more benefit to using Equity and Joint Venture funding structures that one will not find with today’s traditional lenders in today’s volatile and highly regulated traditional commercial loan market … Multiple deals! That’s right, while banks and other traditional lending sources attempt to limit their exposure and risk to any one borrower, with Equity and Joint Venture funding sources, successful deals will increase the money that flows to deals.
Equity and Joint Venture funders are looking to create partnerships that can grow and go ‘do deal!’ Once this is realized, commercial real estate investors, commercial real estate agents, and agencies see the true value and low cost of Equity and Joint Venture financing structures.
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… Dividend America | Commercial Lending has one of the most diverse lending platforms in the Nation. We provide Equity and Joint Venture, Bridge, and Mezzanine debt as well as traditional long-term debt from SBA 7(a) & SBA 504 to Life Insurance Syndication Conduit financing and Non-HUD Assisted Living Facility Construction Financing.
With an office in Phoenix, AZ (Scottsdale) and Atlanta, GA and consultants in cities all over the nation we can assist you with all your commercial real estate needs. From a purchase to rehab to long-term hold debt, we have strategies that are right for your situation.