Your No-Money-Down Blueprint Is Staring You In The Face

Partnerships can make or break your house flipping business depending on how they're structured. We dive into the critical differences between debt partnerships (where your partner acts like a bank) and equity partnerships (where your partner owns part of the deal) to help you choose the right structure for your situation.

• Debt partnerships: Your partner loans you money with interest like a private lender
• Debt pros: Simple to explain, easy to document, you keep all upside
• Debt cons: You carry all risk, may require immediate payments
• Equity partnerships: Your partner invests in exchange for a share of profits
• Equity pros: Shared risk, no monthly payments, attractive to partners wanting upside
• Equity cons: Giving up profit, potential for disagreements, more complex paperwork
• Choose debt if you have experience and confidence in your numbers
• Choose equity when scaling fast or building long-term partnerships
• Always communicate expectations clearly and put everything in writing
• Pro tip: Present potential partners with both options and let them choose

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Chapters

• 0:00 Introduction to Partnership Structures
• 1:51 Debt Partnerships Explained
• 2:42 Equity Partnerships Breakdown
• 3:43 Choosing Between Debt and Equity
• 4:22 Setting Clear Partnership Expectations
• 5:30 Pro Tip and Episode Closing

Transcript

Speaker 1: 0:00

Typically, there are two main structures Debt partnerships your partner acts like the bank or equity partnerships your partner owns part of the deal. Let's break down how each one works. Ever sat in your car scrolling through Zillow and thought, man, if I just knew where to start I could flip one of these. Yeah, I've been there too. Most people who want to flip houses never even start, not because they're lazy, but because they don't have the blueprint. Well, that changes today. If you give me five minutes, I'll give you real world flipping strategies that actually work. No fluff, no theories, no gatekeeping, just real how-to information for you to apply today. Welcome back to Demo, to Dollars, your no-BS flipping playbook, one tip at a time. I'm your host, ed Matthews, and today we're diving into a topic that can make or break your flipping business how to structure partnerships and, specifically, the difference between equity and debt. If you've ever thought about doing a deal with no money down, or you had an opportunity to bring in a money partner, or if you've been pitched by someone who wants quote-unquote a piece of the deal, this episode's for you. Let's talk about partnership basics why structure matters. When you flip houses, you need two things money and execution. Sometimes you have one but not the other. That's where partnerships come in. But the way you structure the money determines who gets paid, when they get paid and how much risk everyone takes on. Typically, there are two main structures Debt partnerships your partner acts like the bank structures. Debt partnerships your partner acts like the bank. Or equity partnerships your partner owns part of the deal. Let's break down how each one works. Debt partnerships the simpler model. In a debt partnership, your money partner is basically a private lender. They loan you the funds you need, say $100,000 for purchase and rehab. In return, you agree to pay them back with interest, just like you would with a hard money lender. The pros of this are that one, it's simple to explain to your potential partner. Two, it's easy to document, with a promissory note and a mortgage. Three, you keep all the upside if the deal performs really well. But here are the cons. All the upside if the deal performs really well, but here are the cons. You carry all the risk. So if the deal flops, you still owe the lender. Payments may start right away, depending on your agreement. This model is great if you're confident with your numbers, you want control and your lender is comfortable acting more like a bank, all right.

Speaker 1: 2:41

So let's talk about equity partnerships. Think about it like sharing a pie. Equity partnerships are different. Instead of charging you interest, your partner puts money in in exchange for a share of the profits. For example, they fund 100% of the deal and you split the profits 50-50 after the sale, after the sale Pros. Well, you're sharing the risk If the deal tanks. You're not on the hook for guaranteed payments. This is attractive to partners who want upside, not just fixed returns, and there's no monthly payments to stress your cash flow. The cons, however, is you're giving up a piece of the profit.

Speaker 1: 3:19

There is the potential for disagreements if expectations aren't clearly set, and there's a more complex element in terms of paperwork LLCs, operating agreements, k-1s come tax time. This works best when you want to scale fast, take on larger projects, or when you're building a long-term partnership with someone who wants to be more than just the bank. And so let's talk about when to choose debt versus equity. Here's how I like to frame it Choose debt if you've got experience, confidence in your ARV and a repeatable minimize downside risk, or if your partner is bringing more than just money, like connections, credibility or flipping and construction experience. This relationship is ideal for brand new flippers. Sometimes you even have to blend them, but that's for another episode.

Speaker 1: 4:19

All right, so how do you set expectations up front? No matter which model you pick, communication is key. Answer these questions before you sign anything. Who's funding what? The purchase, the rehab, the carrying costs? How and when do you get paid and when do they get paid back? What happens if the project goes over budget or over schedule? Who has ultimate decision-making authority? What's the exit strategy? And what happens if the market shifts? What happens if you get hit by a bus? Put all of this in writing. Don't rely on handshakes, even if it's family and friends, especially if it's family and friends.

Speaker 1: 5:04

Here's a pro tip Always have two structures at the ready. When pitching to potential partners, I always present two options the debt model you loan me $100,000 and I'll pay you back $110,000 in six months and the equity model you fund the project and we split the profit 60-40. This lets them choose what feels comfortable and it positions you as a professional. That's it for today's episode of Demo to Dollars. Whether you use debt, equity or a hybrid, the key is clarity. Partnerships can fuel your flipping business, but the wrong structure can sink it. If this helped, share it with a fellow investor who's raising capital. And don't forget to subscribe for more. No BS, flipping strategies Until next time. Thanks for listening to Demo to Dollars. If today's episode helped you move one step closer to your first or next deal, do me a favor follow us wherever you get your podcasts so you never miss a show. I'm grateful to be part of your journey. Now get out there and get cracking. Bye for now.