May '25 • General discussion
The 3 Main ways to Fund your Deal
Everyone talks about “raising capital.”
But too many confuse the tools—treating debt, equity, and everything in between like one-size-fits-all solutions.
They’re not.
The capital you choose affects:
→ Who owns the deal
→ Who gets paid first
→ How much you keep
→ How risky it gets when markets shift
Here’s a clear breakdown of the 3 main ways to fund your deal—and when to use each.
1. Debt (Loans)
You borrow money and pay it back with interest.
The lender doesn’t own your deal but can take the property if you default.
→ Best for deals that already cash flow
→ You keep control
→ Requires consistent payments
Examples:
→ Bank loans – Low cost, strict terms
→ Hard money – Fast, high rates
→ Bridge loans – Short-term funding
→ Construction loans – Paid in stages
→ Seller financing – Flexible terms
Use Debt When:
→ The property covers the debt
→ You’re flipping or refinancing
→ You want 100% ownership
Why It Works:
→ You keep all upside
→ Predictable monthly costs
→ Interest may be tax-deductible
Watch Out For:
→ Payments due no matter what
→ Restrictions on fund use
→ Risk rises in downturns
2. Common Equity (Investor Capital)
Instead of borrowing, you raise money for a share of profits.
No payments—but you give up ownership and possibly control.
→ Best for long-term or value-add projects
→ Flexible deal structures
→ Investors win only if the deal performs
Examples:
→ LP/GP syndications
→ Joint ventures
→ Institutional equity
→ REITs
→ Friends and family
Use Equity When:
→ You want no fixed payments
→ The deal takes time to cash flow
→ You want partners, not just capital
Why It Works:
→ No monthly stress
→ Everyone shares in success
→ Terms are flexible
Watch Out For:
→ Giving up ownership
→ Higher cost of capital
→ Investors may want control
3. Preferred Equity (The Hybrid Option)
A mix between debt and equity.
Investors get paid before regular equity but after lenders.
→ Great for raising more without giving up control
→ Offers fixed returns, sometimes profit share
→ More flexible than loans
Examples:
→ Fixed-return preferred
→ Participating preferred
→ Convertible preferred
Use Preferred Equity When:
→ You want capital without dilution
→ Investors want security + upside
→ You want control with flexibility
Why It Works:
→ No fixed payments
→ Paid before common equity
→ Balanced cost and control
Watch Out For:
→ Pricier than loans
→ May include conditions
→ Still behind lenders in risk
Quick Snapshot:
→ Debt = You keep control, take on payments
→ Common Equity = Share profits and control
→ Preferred Equity = Fixed return + flexibility
Bottom Line:
No one-size-fits-all. The best capital stack depends on your deal.
→ Use debt when it cash flows and you want control
→ Use equity for flexibility or bigger raises
→ Use preferred equity to balance both
Know someone stuck on funding their deal? Send them this post. It could be what they need.
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The 3 Main ways to Fund your Deal
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