Structure Development Deals with Minimal Capital

How Do You Structure Real Estate Development Deals with Minimal Capital Investment?

Ground-up development often feels out of reach for investors who lack substantial capital. But what if you could enter a $5.5 million development deal with just $50,000 down? Katie Kim, a developer with over $100 million in completed projects, has proven that creative deal structuring—or “creative stacking” as she calls it—makes this possible.

On a recent episode of The Real Estate Investing Club podcast, Katie shared how she helps businesses and investors expand through real estate while minimizing their capital requirements. Her approach centers on layering multiple financing sources strategically, partnering with economic development councils, and structuring deals that benefit all parties involved.

Quick Answer: Minimal Capital Development Strategy

Real estate investors can structure development deals with minimal capital by combining developer-for-fee services, economic development incentives, joint ventures, seller financing, and stacked debt structures. This approach allows developers to secure land for free or at steep discounts, bring in partners who contribute different resources (land, experience, or credit), and exit investors in 3-5 years with substantial returns—often exceeding 300%.

What Is Creative Stacking in Real Estate Development?

Creative stacking differs fundamentally from the risky “creative financing” techniques that gained notoriety during the 2008 financial crisis. <a href=”https://www.developer.com/unlocking-creative-financing-sources/” target=”_blank”>According to industry experts</a>, today’s creative financing focuses on flexible, non-traditional funding sources rather than overleveraged speculation.

Katie Kim defines creative stacking as the strategic layering of multiple financing sources to minimize the sponsor’s capital contribution while maintaining project viability. “I call it creative stacking because I want to think creative financing has bad blood with it, to be honest, from like the 08-09,” Katie explained. “And it’s really not the financing part. It’s how you stack it and what sources you bring in.”

This approach recognizes that <a href=”https://marsh-partners.com/blog/development-financing-how-to-finance-your-next-real-estate-development-venture” target=”_blank”>most sponsors don’t have 20-40% of a project’s costs in cash</a>, making alternative equity structures essential.

Key Components of Creative Stacking

The capital stack in development typically includes several layers, each with different risk profiles and return expectations:

Senior Debt: Traditional bank financing secured by the property (typically 50-65% loan-to-value)
Mezzanine Debt: Higher-cost subordinate debt that fills the gap between senior debt and equity
Preferred Equity: Equity with fixed return expectations and priority over common equity
Common Equity: The developer’s ownership stake with the highest upside potential
Economic Development Incentives: Free or discounted land, tax abatements, or infrastructure credits

Katie’s innovation comes from adding unconventional layers like developer-for-fee structures and design-build-lease arrangements that reduce the total capital needed from traditional sources.

How Does the Developer-for-Fee Model Minimize Capital Requirements?

Katie launched The Kim Group in 2015 with a developer-for-fee service model that fundamentally changed how businesses could access real estate for expansion. Rather than requiring businesses to become developers themselves, her firm guides clients through the entire process while structuring deals that dramatically reduce their capital outlay.

“We would be someone’s developer,” Katie explained. “We’d help guide them through the process, taking their business, adding real estate to it, and really enabling them to grow, say, three times the size for one and a half times the debt.”

Who Benefits from Developer-for-Fee Services?

This model works particularly well for:

Consulting companies looking to own their office space
Office furniture companies wanting showroom expansion
Franchise restaurants (KFC, Subway, Long John Silver’s) needing new locations
Daycares requiring purpose-built facilities
Financial advisors seeking to own rather than lease
Professionals wanting to leave their W-2 and start their own development company

The approach leverages the developer’s expertise and relationships while keeping the business owner’s capital tied up in their core operations rather than construction costs.

Design-Build-Lease with Option to Buy

One of Katie’s most effective structures is the design-build-lease arrangement with a purchase option. The developer builds the space to the client’s specifications, leases it to them during the stabilization period, and provides an option to purchase once the building has proven cash flow.

This structure offers multiple advantages:

The business gets into a custom space with minimal upfront capital
The developer secures a guaranteed tenant and maintains control during construction
Both parties can defer the purchase decision until the building achieves stabilization
The business benefits from potential property appreciation while preserving capital for operations

As Katie noted from her construction background: “We worked with consulting companies, office furniture companies. We had some daycares, restaurants, not necessarily McDonald’s, but a couple other franchise like KFC, Subway, Long John Silver’s.”

What Role Do Economic Development Councils Play in Deal Structuring?

One of the most overlooked financing sources in real estate development is economic development councils (EDCs). These governmental or quasi-governmental organizations focus on driving job creation and tax base expansion in their communities—making them natural partners for developers who can deliver both.

“I’m always a fan of building your network,” Katie emphasized. “When I’m looking for new deals, if I’m going into communities, I’m talking with the EDCs in the cities first to see where they own land and where they want development to happen.”

How EDCs Reduce Land Acquisition Costs

EDCs can offer developers:

Free or heavily discounted land in target development zones
Tax abatements for 5-10 years on property taxes
Infrastructure credits for roads, utilities, or other public improvements
Fast-track permitting to reduce holding costs and timeline risk
Workforce development partnerships to address labor needs

<a href=”https://businessintexas.com/” target=”_blank”>Texas, where EDCs are particularly active</a>, has ranked as the #1 state for business for 20 consecutive years according to Chief Executive Magazine, largely due to its aggressive economic development incentive programs.

Target Markets: Secondary and Tertiary Cities

Katie focuses her EDC strategy on secondary and tertiary markets rather than major metros. “I like to go to secondary and tertiary markets because a lot of times those are the communities that are trying to poise themselves for growth and they’re not there yet,” she explained. “So people haven’t looked at them. They have a lot of the opportunities for economic incentives, which are where I like to play.”

Her current focus areas in the Texas Triangle include:

Hutto, Texas: Near the Samsung semiconductor plant in Taylor, experiencing massive employment growth
Liberty Hill, Texas: Growing at 100% annually with significant school infrastructure investment
Killeen, Texas: Adjacent to Fort Hood military base, consistently overlooked despite strong fundamentals
Tyler, Texas: Regional hub with strong manufacturing presence and lower operating costs

These markets offer the dual advantage of lower land costs and eager municipal partners willing to provide substantial incentives to attract quality development.

How Can Investors Structure Deals with Multiple Equity Partners?

<a href=”https://www.altusgroup.com/insights/financial-structure-of-real-estate-development/” target=”_blank”>Modern real estate development</a> increasingly relies on partnerships that bring different resources to the table rather than just cash. Katie’s approach to deal structuring recognizes that value comes in many forms.

Types of Value Partners Can Contribute

Land Contributions: Property owners can contribute land at an agreed valuation in exchange for equity rather than selling outright. This eliminates the developer’s land acquisition costs while giving the landowner participation in the upside.

Credit Partnerships: Developers with strong track records but limited liquidity can partner with individuals or entities that have strong credit profiles to sign on debt instruments.

Experience Partnerships: “Partner with people that have different scars than you do, and they have different experience than you do,” Katie advised. A novice developer might bring deal flow and hunger while an experienced developer contributes process knowledge and lender relationships.

Industry Expertise: For specialized developments (medical offices, specialized manufacturing, cold storage), partnering with someone who understands the end-user’s needs can dramatically reduce project risk.

Structuring Terms That Work for Everyone

The key to successful multi-partner deals is aligning incentives properly. Katie structures her partnerships with clear expectations around:

Return waterfalls that reward different contributions appropriately
Decision-making authority based on who bears the most risk
Exit timelines that match partner objectives
Communication protocols that keep everyone informed as situations evolve

“I always tell my team, like, if I’m not listening to your brain, I’m wasting money,” Katie noted. “And I think that that’s a great way to look at your partners when you’re bringing them in.”

What Was Katie Kim’s Most Successful Creative Deal Structure?

Katie’s Treskers Bakery project demonstrates the full power of creative stacking in action. This deal achieved extraordinary results by layering multiple creative financing sources.

The Deal Structure

Total Project Value: $5.5 million development
Business Owner’s Investment: $50,000 (less than 1% of total project cost)
Bank Debt: $1.8 million (approximately 33% of project cost)
Space Allocation: The bakery expanded from one location to three times their previous space
Additional Income: The building was six times the bakery’s needs, creating rental income from other tenants
Investor Exit: Four-year hold with 353% return to investors

How the Numbers Worked

The business owners achieved three times the space for one and a half times their previous occupancy costs—dramatically improving their business economics. Meanwhile, investors received exceptional returns relative to the hold period, and the bakery owners gained both business expansion and real estate equity.

This structure worked because:

Economic development incentives likely provided free or discounted land
Design-build efficiency reduced construction costs below market
Multi-tenant building created income diversification beyond the anchor tenant
Strategic debt placement minimized equity requirements while maintaining safe leverage ratios
Exit timing captured appreciation before typical market cycles turned

As Katie put it: “We were able to get our business owners into a development that had them expanding three times the space for one and a half times the cost.”

For more insights on how to structure seller financing and creative deals, explore additional resources from The Real Estate Investing Club.

What Lessons Did Katie Learn from Deals That Went Sideways?

Not every deal proceeds according to plan. Katie’s most significant learning experience came when COVID-19 hit several of her projects during construction or pre-construction phases.

The Crisis Communication Approach

“We had a couple of deals that were either in construction or about to start construction when COVID hit,” Katie recalled. Rather than trying to manage the situation alone, she immediately engaged her network.

Her approach centered on three principles:

Radical Transparency: “Bad news is bad news. Nothing is going to be solved by holding it in. So communicate it to your team and start working on those solutions faster.”

Collective Problem-Solving: “Leaning in to my network, my partners, my team, and being open and honest about what was going on and communicating that and allowing their brain power to come into the deal.”

Building Future Trust: “People will appreciate that openness and that candor and that communication. And you’re going to see that you’re going to get a lot more buy-in into your partners and your investors.”

The Value of Diverse Experience

This situation reinforced Katie’s partnership philosophy: “Partner with people that have different scars than you do, and they have different experience than you do.”

When unexpected challenges arise—market shifts, construction delays, regulatory changes, or global pandemics—having partners who’ve navigated different difficult situations provides a broader toolkit for solutions. <a href=”https://www.therealestateinvestingclub.com/ground-up-development-wealth/” target=”_blank”>Ground-up development</a> inherently carries more risk than stabilized asset investment, making this diverse perspective essential.

For investors interested in building real estate wealth while working full-time, Katie’s emphasis on partnerships becomes even more critical, as active W-2 professionals need trusted partners to handle day-to-day development decisions.

How Do You Get Started with Development Without Prior Experience?

The barriers to entry in development appear daunting: lack of capital, no construction knowledge, no lender relationships, and no track record. Katie’s own journey and her work with clients show that these obstacles are surmountable.

Learn by Doing—But Start Small

Katie grew up in a construction family but noted an important distinction: “When you’re in those families, they teach you what to do, not how to do it. So then you have to fight to learn the how.”

Her advice is to start investing immediately, even if not in development initially. She personally bought a condo every year after graduating college, building her real estate foundation through small rental acquisitions before attempting larger development projects.

Build Your Network First

“If you build your network and ask and put out there what you’re looking for, your network will help you, help it come to you,” Katie emphasized.

Key relationships for aspiring developers include:

EDC directors in target markets who control land and incentives
Experienced developers willing to mentor or partner on initial deals
Specialty contractors who understand current construction costs
Commercial lenders who can explain current underwriting standards
Real estate attorneys who structure deals and navigate regulations
End users in your target asset class who can validate demand

Join Katie’s Educational Platform

Katie offers free masterclasses through her educational platform at katy kim.com (also found on all social media @the katy kim). These classes help investors:

Assess where they are on their development journey
Identify the specific resources they need for their next step
Connect with mentors and potential partners
Learn the deal structuring frameworks that minimize capital requirements

“When you reach out, there’s a place where you can book a call with us to see where you are on your journey. And our team will help guide you into the resources that we can offer you at what stage you’re at,” Katie explained.

For those exploring off-market real estate strategies, Katie’s EDC approach provides a unique source of deal flow that most investors never tap into.

What Makes Development Different from Other Real Estate Strategies?

Development fundamentally differs from buying stabilized assets in several critical ways that affect how deals must be structured.

Higher Risk Requires Creative Structuring

<a href=”https://www.privatebankerinternational.com/comment/what-it-takes-to-make-real-estate-development-financing-work/” target=”_blank”>Development financing faces significant headwinds</a> in today’s market, with traditional banks remaining conservative even 15 years after the financial crisis. This conservatism forces developers to pursue creative structures out of necessity, not preference.

Development carries construction risk, entitlement risk, lease-up risk, and market timing risk—all of which occur simultaneously. This risk profile makes creative stacking essential rather than optional.

Longer Hold Periods Need Patient Capital

Unlike fix-and-flip deals that exit in 6-12 months or value-add multifamily that stabilizes in 18-24 months, development projects typically require 3-5 years from land acquisition to stabilized exit. Finding investors and partners whose capital timeline aligns with this reality is crucial.

The Upside Justifies the Complexity

Despite the additional complexity and risk, development offers returns that stabilized asset acquisition cannot match. Katie’s Treskers Bakery project returned 353% in four years—far exceeding typical returns on value-add or core-plus acquisitions.

The creative structures that minimize capital requirements amplify these returns even further by allowing developers to control larger projects with less equity.

For investors comparing strategies, explore how different asset classes create wealth through The Real Estate Investing Club’s comprehensive guides.

What Financial Structuring Mistakes Should Developers Avoid?

Katie’s experience across 100+ million in development reveals common structuring mistakes that can sink otherwise solid projects.

Over-Leveraging Without Contingency Plans

<a href=”https://www.developer.com/unlocking-creative-financing-sources/” target=”_blank”>Creative financing carries higher costs and risks</a> than conventional loans. While creative stacking can minimize equity requirements, developers must maintain reserves for unforeseen circumstances.

“Contingency plans can help you offset the greater risk and uncertainty that can accompany creative financing deals,” industry experts advise. Katie’s approach always includes exit strategies and buffer capital.

Neglecting Communication with Partners

Katie’s COVID experience taught her that communication gaps cost money. “If I’m not listening to your brain, I’m wasting money,” she noted. This applies equally to lenders, investors, contractors, and operational partners.

Regular, honest communication prevents small issues from becoming large problems and maintains trust when unexpected challenges arise.

Ignoring Exit Strategy from Day One

Every creative structure must include a clear path to exit or refinance. Mezzanine debt and hard money loans often include balloon payments that require either property sale or refinancing into permanent debt.

Developers should structure initial deals with multiple exit options rather than depending on a single outcome.

Failing to Document Everything

<a href=”https://resimpli.com/blog/creative-financing/” target=”_blank”>Creative financing is legal when properly disclosed and documented</a>, but insufficient documentation creates legal and partnership problems later.

Every handshake deal should become a written agreement. Every partnership contribution should be clearly valued and documented. Every payment schedule should be formalized.

For those interested in starting their real estate journey, understanding these common mistakes can prevent costly learning experiences.

Conclusion: Development Becomes Accessible Through Creative Stacking

Katie Kim’s approach to real estate development proves that substantial capital requirements shouldn’t prevent qualified investors from participating in ground-up projects. By strategically layering multiple financing sources—economic development incentives, design-build-lease structures, joint ventures, seller financing, and properly structured debt—developers can enter significant projects with minimal cash investment.

The key insights from Katie’s experience include:

Creative stacking differs from creative financing: It focuses on strategic layering of legitimate sources rather than overleveraging
EDCs provide often-overlooked capital: Secondary and tertiary markets offer the best incentive opportunities
Partners contribute more than money: Land, credit, experience, and industry expertise all have value
Communication determines success: Transparent, frequent updates build trust that survives unexpected challenges
Network drives deal flow: Relationships with EDCs, contractors, and end users create opportunities others miss

Whether you’re a business owner looking to expand through real estate ownership, an investor seeking higher returns than stabilized assets provide, or an aspiring developer wanting to leave your W-2, creative stacking makes development accessible.

Katie’s success with projects like the Treskers Bakery—$5.5 million total value, $50,000 from the business owners, 353% return to investors in four years—demonstrates that properly structured development deals create exceptional value for all parties involved.

The Real Estate Investing Club continues to bring you insights from industry leaders who are actually executing these strategies. Learn more about development opportunities and creative deal structures through our podcast and educational resources.

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