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AISING MONEY, WHETHER it’s derived from investors, family,
Rfriends, or borrowed from commercial lenders, is one of the
most crucial elements in any real estate transaction. The use of bor-
rowed money to buy real estate serves several purposes: It gives you
more leverage, which enables you to purchase much more, often 20
or 30 times more than what could otherwise be bought for cash; it
reduces your equity exposure; and the interest payments on the loan
provide a significant tax deduction.
When Trump invests in a real estate project, he typically puts up
less of his own money than you might think. For example, he will
often erect a building to either rent out the available space or sell the
residential units in it. Typically, his investors in the project will put
up 85 percent while Trump puts up 15 percent. Then he and his part-
ners get a fixed rate of return on their cash investments. However, the
return accrues and is not paid until there are cash proceeds to distrib-
ute. When units are sold, Trump uses the excess funds over and above
themortgage to be applied to the accrued interest. When the accrued
interest has been paid, available funds are used to repay the cash in-
vestment of the partners. When all partners get back all their money
plus the accrued interest, additional proceeds are divided among the
partners. But the split of the excess funds is no longer 85 percent for
thepartners and 15 percent for Trump. Now the split of the profits
couldbe50–50, 40–60, or 25–75, depending on certain variables in-
herent in the transaction. It depends on the interest rate paid to the
outside partners. The higher the rateofinteresttheoutside partners
get, the lower the percentage they get. The lower the rate of interest
paid to the outside partners, the higher the percentage they get. Keep

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