Using a hard money loan combined with an equity slice is an excellent strategy to retain a larger ownership share in a real estate investment while accessing the necessary capital for acquisition. Here's a more detailed breakdown:

The Strategy: Leverage and Equity Slice

• Hard Money Loan (90%):
  Hard money loans are asset-based and typically cover a significant portion of the purchase price. In this case, the loan would finance $900,000 of a $1,000,000 multifamily property. These loans are quicker to secure than traditional financing, though they come with higher interest rates and shorter terms.

• Equity Slice (10%):
  The remaining $100,000 can be covered by bringing in equity partners. Instead of traditional Joint Venture (JV) structures where partners might demand 50-70% ownership, equity partners in this approach would contribute only a small slice of the total cost, reducing their claim on profits and control to approximately 10-20%.

Example: Traditional JV vs. Hard Money Strategy

Traditional JV

• Purchase Price: $1,000,000

• Equity Partners Fund: $1,000,000 (100%)

• Ownership Split: 50%-70% to equity partners

Hard Money & Equity Slice

• Purchase Price: $1,000,000

  • Hard Money Loan: $900,000 (90%)

  • Equity Partners Fund: $100,000 (10%)

• Ownership Split: Max 20% to equity partners

Key Difference:
With traditional JV funding, you sacrifice a significant share of the deal, often losing control over decisions and profits. The hard money route allows you to retain 80%+ ownership and remain in the driver’s seat.

Upside:

1. Greater Ownership Share:
   You hold 80-90% equity, which means a larger share of cash flow and profits upon refinancing or selling the property.

2. Control Over Decisions:
   With fewer partners and less diluted ownership, you maintain authority over property management, renovations, and exit strategies.

3. Scalable Approach:
   By leveraging, you can conserve capital for additional investments or emergencies, potentially expanding your portfolio faster.

Downside:

1. High Leverage:
   A 90% loan-to-value (LTV) ratio means higher monthly payments and less margin for error. If the market shifts or expenses exceed expectations, profitability may suffer.

2. Short-Term Loan Pressure:
   Hard money loans typically require repayment within 6-24 months, which puts pressure on the investor to refinance, sell, or add value quickly.

3. Increased Risk:
   The higher debt level increases financial risk, especially if vacancy rates, unexpected costs, or interest rate hikes impact cash flow.

Mitigating the Risks:

1. Accurate Underwriting:
   Conduct detailed due diligence, focusing on realistic projections for rental income, expenses, and market trends.

2. Value-Add Strategy:
   Use the loan to fund improvements that increase property value, allowing you to refinance into more favorable terms.

3. Strong Exit Plan:
   Plan ahead for refinancing or selling the property before the hard money loan matures. This is especially critical in a volatile market.

The Wrap:

The hard money loan and equity slice strategy is a powerful tool for retaining equity and control in real estate investments. While it carries higher leverage risk, the upside of greater ownership and scalability makes it an attractive option for investors with a clear plan and the ability to manage short-term challenges effectively.

(these are just my opinions as I am not a financial advisor)