Equity funding is when you provide financial investment in return for a share in the ownership of a property project (whether buy-to-let or development). Your equity could take the form of an ordinary, preference or even a partnership share.
Ordinary shares are the riskiest form of equity funding since you will only receive a return – in dividends or capital gain – when the shares are sold; provided the project indeed proves profitable.
Preference shares mean a regular interest payment related to the amount of your investment, and which can accrue over time if the development proves initially unprofitable. Another plus is that if the company is liquidated, you’ll be paid before ordinary shareholders.
Partnership shares are becoming more popular due to new tax laws.