Equity Financing in Real Estate

Equity financing in real estate is provided by a number of traditional and non-traditional investors. These funds are provided by the investors to get shares and at the same time the investors are also provided with a share in the profits earned from the particular property.
Equity finance is considered as one of the easiest methods of financing investments in the real estate.
According to the concept of equity finance, the fund is provided as equities. These finances are offered by a number of financial institutions including banks and non-banks. At the same time, equity financing in real estate can also be done by the non-traditional sources like business associates, friends, relatives and private investors. Through debt financing, the money is borrowed from the lenders but equity financing in real estate is actually investing the money in the property and because of this, the investors become more interested.
There are a number of reasons for using equity financing in real estate investments. The prime reason is equity financing is very effective in bringing down the amount of cash flow that goes out of the income properties. At the same time, there are a number of ways of making repayments for these finances.
Among the repayment forms for equity finances, sharing profits with the investor are very popular.
The profits from a property can be shared annually or semiannually according to a pre-fixed rate. The repayment amount and rates are determined by a number of factors including the annual income, capital gains and so on.
Another important reason of providing equity financing in real estate is that the investor gets a share in the property. Whenever the investor is investing in the equity of a property, the money is actually not lent but it is added in the capital and so the investor is provided with these shares.

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