---
title: Participation Mortgages, Income Kickers and Equity Kickers
description: Explains participation mortgages, income kickers, and equity kickers.
image: https://info.c-loans.com/hs-fs/file-13894080-jpg/images/medium_commercial_building.jpg
---

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## [Participation Mortgages, Income Kickers and Equity Kickers](https://info.c-loans.com/bid/55129/Participation-Mortgages-Income-Kickers-and-Equity-Kickers)

Posted by [George Blackburne](https://info.c-loans.com/author/george-blackburne) on Thu, Jun 16, 2011

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**[Blackburne & Sons](http://www.blackburneandsons.com)** is rolling out a revolutionary new product for ![Medium Commercial Building](https://info.c-loans.com/hs-fs/file-13894080-jpg/images/medium_commercial_building.jpg)commercial loans called a *participation mortgage*.  Rather than make a new hard money commercial mortgage at 13.9%, we might now make the same loan at just 7.9%.  The loan, however, would have an *income kicker* and an *equity kicker*.

An ***income kicker*** is a share of any increase in the gross monthly income of the property.  For example, let’s suppose the gross scheduled income at the time the loan was originated was $10,000 per month.  If the gross monthly income goes to $16,000; then Blackburne & Sons would take a percentage of that $6,000 per month increase.  The typical income kicker would be between 15% and 50%.

An ***equity kicker*** is a share of any increase in the value of the property.  For example, let’s suppose a commercial building is worth $1 million at the time we originate a loan.  The borrower renovates the property and then leases it out.  Suddenly the property is worth $1.8 million.  Blackburne & Sons would take a certain percentage of that $800,000 increase in the value of the property, but only when the property eventually sells or our loan is either refinanced or paid off.  A typical equity kicker would be between 15% and 50%.

Why not just make the loan at 13.9% and forget all of this nonsense about income kickers and equity kickers?  The problem is that the monthly payments on a $1 million loan at 13.9% will break the financial back of many borrowers.  Hard money investors want their big yields, so it’s simply not possible to make a hard money loan at 7.9%, absent some sort of additional financial incentive, like these two kickers.

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 Topics: [Participation Mortgage](https://info.c-loans.com/topic/participation-mortgage)

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