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Commercial Real Estate FAQ With Stephen Epstein On Real Estate Development & Investments

What Creative Ways Have You Discovered To Structure Real Estate Deals?

The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.

Creativity is at the very center of many high-quality real estate deals. If you can raise the funds to make it happen, the sky is the limit in terms to your deal structure. When getting together funds for a great real estate deal that you have under control, you have private investors, equity investors, crowd funding, and your creativity can drive these deals to fruition. For the most part, if you can think it, and it’s legal, you can make your creative deals happen. 

What creative ways have you discovered to structure real estate deals? Structuring a real estate deal is like doing any kind of business deal. It takes a lot of creativity, it takes a lot of hard work, it takes a lot of back and forth on the legal side, on the finance side working with the bank, so there’s a lot of variables. And every asset class, meaning whether you’re doing office, you’re doing residential, you’re doing industrial, each of them have their own kind of nuances when it comes to deal structure and what investors like to see, and what the bank wants to see. So, in terms of creative ways, what I would say is that the majority of the creativity in a deal has to do with the capital stack. Meaning how do you put the money together to do the deal? And that is where, honestly, you have the most creativity and flexibility because you can do anything you want as long as you come up with the money, right? In order to buy a deal, or to build a project, you can do a million different things in order to come up with, let’s say, $10 million to build an industrial building. It doesn’t matter where you get or how you get the $10 million as long as it’s legal, so there’s millions of different ways to structure a transaction. And so what I would do is encourage you to, whoever is listening to this, to be as resourceful as possible and as creative as possible about how you put the deals together. There’s private money out there, meaning in the form of debt and equity, people will lend you money, private investors will lend money so you don’t even have to go to a bank, there’s private debt funds out there, there’s investors of all kinds, institutional equity investors, friends and family equity investors, crowdfunding. 

There’s so many ways to get a transaction financed that I think, to me, that’s where the magic lies in doing real estate deals. Now of course if it’s not a good project and it doesn’t have good risk adjusted returns, then it’s going to be very difficult to be creative with your deal structure, and it’s going to be very difficult to get the project financed at all in the first place. But if it’s a very good deal, and you have control of it, very important meaning you have it actually under contract, then there’s lots and lots of different ways you can get something financed and it’s really only limited by your imagination. 

About the author

Richard Wilson