Equity financing can be a game-changer for real estate investors. In this episode, Steven Jack Butala and Jill K DeWit explore the benefits of using equity to fund real estate deals, including reduced risk and increased potential for success. They discuss how to find equity partners, structure deals, and navigate the process effectively. Tune in to learn how to leverage equity financing to achieve your real estate investing goals.

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Equity Financing: A Powerful Strategy To Fund Your Real Estate Dreams

This is Episode 2,106. Jill and I are talking about how to fund your real estate deal with equity. We talked all week this week. Jill and I are talking about the five basic ways to fund your real estate deal, and we talked about debt, funding it with debt like you do with a mortgage, which Jill and I are not big fans of. We have tried it, and over the years, it didn’t work for us. Equity, which we have built an entire company on, is our favorite way to fund transactions. We’ll talk about the differences, the pros and cons.

You mentioned the funding with debt. Less than 1% have we even considered that? We don’t do it. I’m trying to think of an example where we have done it, and it worked.

There isn’t one. Largely because I made a lot of debt mistakes before Jill and I joined forces, and that’s what’s going on.

I’m like, “I don’t remember being involved in those, which is good.” It happened before me.

What I should have talked about from a debt standpoint, because people in finance, especially from an academic standpoint, I’m going to say maybe people who have a little bit less real-world experience but more academic experience, like a professor. They are going to make a bunch of arguments about utilizing financing or debt to leverage what you are trying to do. There are appropriate situations like that.

An example might be and it’s out of the real estate realm using debt to finance a company where you’ve already done 3, 4, or 5 companies, and you know exactly what to do. You have the customers lined up, you need an inexpensive source of capital and a repayment schedule that’s rational, and so that makes all kinds of sense.

Analyzing Redfin’s 2025 Housing Market Predictions

In our real estate world, this day and age, especially with mortgage rates as high as they are, I don’t think it makes as much sense especially if you don’t know what you are doing and you are new, you are going to get yourself into some trouble. You are going to get over-leveraged. Each day on the show, we answer a question from our Land Academy member Discord forum and take a deep dive into land-related topics by popular request. Cesar says, “What do you think about this?”

There’s a copy-and-pasted graphic of a Redfin housing market prediction for 2025. It’s a four-point prediction. Number one, US home prices will rise 4% year over year as buyers outnumber sellers. Certain markets may see prices fall and rise further. That’s the key to the whole rise-and-fall further. The whole key to this question is, yes, this might be a national perspective, but certain markets, plus or minus.

2025 predictions.

Number two, mortgage rates are likely to remain around the high 6% range. Yes, I agree. Home sales will increase between 2% and 9% in 2025 due to pent-up demand. Possibly, more homes will be built, ultimately improving rental and home affordability. I completely disagree with that. Redfin is a publicly traded company in the business of keeping itself, like many companies, on the internet and in front of everybody and their competitors, like Zillow and Realtor.com and things like that.

Redfin, unlike Zillow, has a huge network of brokers. Redfin is in the business of convincing you that their real estate agents are better than regular ones. They are posting this optimism. This is all optimistic. “Home prices will rise 4%.” Every single market that Jill and I have analyzed and we share this all the time I don’t care if we are going out to dinner. It’s a very boring component of our relationship. We are going to see a huge market change in a lot of markets in 2025. Redfin’s prediction is incorrect.

Will we see a 4% year-over-year rise if you average whatever’s happening in Southern California from coast to coast? Maybe. That might be true. Unless you live in a market that has been identified all over the internet as one that probably will gain, you are probably going to lose. Most markets are going to lose a huge amount of equity value, I believe. Jill and I are set up to buy hundreds and hundreds of houses in 2025. Our company’s called Land Academy, and there’s a reason we are choosing to buy houses in 2025. It’s because of this housing affordability for a regular family to afford a house that is getting more unlikely.

When those things happen, prices go down. It’s a very specific market-to-market. That’s number one. Number two, mortgage rates are the highest. In my modern professional life, they are the highest they have been. A house costs twice as much to live in than it did about several months ago, only because of mortgage rates.

The good news is that this young generation is huge in numbers. It’s the largest generation ever in the history of the world, and they are buying houses. They want to buy houses, and they will find a way. That demand is not going to make up for the fact that wages are low, mortgage rates are high, and all of that. I see huge turmoil in the housing market this 2025.

There will be a huge turmoil in the housing market this year. Share on X

Hint, by the way, we are doing houses in addition to land.

How To Fund Your Real Estate Deal With Equity

Our topic is how to fund your real estate deal with equity. My favorite way and yours probably too. Like we said, you can take on debt, do a real estate deal, and then resell it and repay the debt along with it, and you’ll incur what Jill correctly called “carrying costs.” That’s no fun. Why wouldn’t you call somebody like us or anybody else in the Land Academy Group when you find a great real estate deal that you know you can flip? With any type of real estate deal, take on some equity financing where you get some seasoned expertise like you would with us or many Land Academy members which increases your potential for success. Is it a little bit more expensive than debt sometimes? Yes, but you are also completely deferring or dissipating your risk.

Here’s a regular equity deal for us, we’ll be the funders in this case. A Land Academy member finds a deal. Their model is to buy for $30,000 and sell for $90,000. It gets presented to us in the correct format. They have all the Land Academy education. We know that they know what they are doing, and they present it to Jill. Jill says, “I agree.” Jill runs all of our deal funding. She agrees that this is a deal where we are going to buy it for $30,000 and sell it for $90,000.

“I’m happy to fund the $30,000 in its entirety with all the closing costs and everything so you, Land Academy member, have to come up with nothing. I will take on all the risk. If the whole thing goes sideways, then you can throw me the keys figuratively and I will figure it out.” Now you have no risk. You did your job. You found a great real estate deal, and we are going to split the profit of the transaction with you based on some percentage. If you are brand new, it’s probably going to be 50%. If you’ve done a bunch of deals, it could be as low as 10%. 10% to us, 90% to you. That, in a community, is the way, my friends, that you get deals done. It’s also the original, for real, 0% down. You don’t need any money to get started. All the stuff that you used to see on late-night TV and now you see it on a Facebook stream you do not need any money to get started. That’s very real, but you have to find a great real estate deal.

You do not need any money to get started, but you have to find a great real estate deal. Share on X

Which is not hard.

No. That’s why we have been here for many years, finding great real estate deals.

That is the best way. I’m talking about land or houses. Fill in the blank. We have done it for all kinds of different properties. Large acreage and ranches, things like that. It’s a big thing and I don’t even want to take on the whole $1.2 million check, I’m going to bring in some people. Reach out to us, and we’ll figure it out together. That goes on all the time behind the scenes in Land Academy, where people are doing partnerships and putting things together like that.

The main thing is, that I watch and read and hear so many people thinking they can’t get into this space because they don’t have the money to buy the properties. They are like, “I can afford this. I can afford the education. I can afford the mail, but when it comes time, I’m not going to have the $30,000 left over to buy that one. What if I want to buy three of them? What if three great things come up? I don’t have $100,000 sitting around.”

Maybe it’s a house. You want to do this with a house. You are like, “I know what’s going on. I know I can do this. I’m smart and I found these great things, but I don’t have the $350,000 to buy the house. It’s worth $500,000.” Guess what? We are here. We are sitting here. Like Jack always says and we mean it. No good deal should go to waste. We will fund it for you and partner with you. It’s so easy. If you have some skin in the game too or maybe you don’t have all the money, and you just need half of it, I’m happy to do that. Put both of our names on the deed. Everybody feels great about that.

We do that all the time.

I love that. If I’m not sure about it, I will go, “How about you put in some money too?” If you have some skin in the game, you get my pair of eyes, I have already approved it. I’m like, “I see it, but let’s do this together.” You are like, “Whatever you’ve got, put it in,” or you have zero. We’ll work it out together.

The Benefits Of Equity Financing

Here are some extreme examples of equity financing. Equity financing has been going on behind the scenes among rich people since there’s been money, but debt is what everybody talks about. It’s that same old story. Here are a couple of extremely identifiable scenarios for equity financing that are not in the real estate space.

Tesla. Elon Musk started Tesla with his own money, tons of money, and went broke. What did he do? He took the company public. He chose to give away 40% or 50% of the company, or whatever the numbers are. I don’t know the exact numbers to the public in lieu of cash that they buy stock with. That’s equity financing, and it worked out. He got very wealthy because his shares, his 51% of the company or whatever the numbers are, became more valuable as the value of the stock went up and down because everybody put money in. That’s equity financing.

Here’s another example, SpaceX was equity-financed by a small group of people. It never went public because he proved himself with Tesla and proved himself in general to the world that he’s an amazing marketer if nothing else. He’s a great marketer. He raised capital with some extremely wealthy people and chose not to take that public. There are still always rumors that he might do that. Those are equity finance deals. The big complaint and we are going to talk about this next time with syndication and how syndication works has always been, “I’m a regular person. I don’t have access to that.” That’s not the case. You do because you can find a piece of real estate, call Jill, and you have complete access to total financing.

For anybody, it seems to be a great deal.

Join us next episode where we discuss how to fund a real estate deal with syndication. You are not alone in your real estate ambition. We are Jack and Jill. Information and inspiration to buy undervalued property.