Question

A form of real estate financing that gives the lender rights to the equity through increased...

A form of real estate financing that gives the lender rights to the equity through increased payments or part of the residual value over the balance of the loan?

Group of answer choices

Participating debt

First mortgage debt

Permanent debt

Ground lease

Construction debt

Transitional debt

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A form of real estate financing that gives the lender rights to the equity through increased payments or part of the residual value over the balance of the loan?

Answer - Participating debt

Participating debt financing allows the lender to have participatory rights to equity through increased income and/or residual value over the balance of the loan at the time the loan is funded. The lender not only design a loan with an agreed-to interest rate, but he also engage in a percentage of the equity operating cash flow due to sale or refinance proceeds. The benefit to the lender is that his returns can be significantly increased by receiving a percentage of the potential future cash flow.

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