Am I getting low balled??

[David Hollenberger]

Hey everyone I am new to REI however I have an opportunity to get my first commercial deal under contract. I have an off market deal that I have very close connections with the individuals who own/operate it currently.

I connected with a local commercial broker/ investor in my area and I told him about this opportunity. I explained the situation and how I’d love to buy it but don’t know the ins and outs or have the capital right now. The investor brought 2 more investors he knows into the group to help purchase this property.

The deal:

Mixed use commercial building

Purchase price around $800k (still negotiating)

ARV $1.3m

Renovations: Repairs/cap ex $300k

I know those aren’t all the numbers but hear me out. I brought the deal to the now group but I don’t have any capital to put into the building. My equity in the building would be made up of bringing the deal and acting as boots on the ground building manager type roll.

Investor 1 is the commercial broker he would be handling the lending and providing 1/3 of initial capital

Investor 2 owns a construction company which would be taking care of the renovations and providing 1/3 of initial capital

Investor 3 would be providing 1/3 of initial capital.

The plan is to do the renovations needed to get the building updated and the spaces utilized more efficiently. While fixing poor management and easing rents where needed. We hope to refi by the 18 month mark. Upon refi the investors should be able to get most if not all their money back out of the deal. (This plays a lot into my thoughts on the splits)

At a meeting we had the discussed equity and cash flow splits. They offered me 5% equity and 5% cash flow while the other 3 split the rest evenly. This kinda seems like a slap in the face to me.. I know I’m new and this is my first deal but that seems low.. I feel like bringing the them the deal should bring at least 10% on each split and then being the manager of the property should be worth more than 5% itself also..

Their reasoning for my lower % and their higher % is due to the upfront capital.

With that said, Am I being taken advantage of or is this what to expect??