Question on JV Agreement

[Robert Piller]

Need some guidance:

A few partners have put up $150K for non-refundable earnest money on a 31-unit apartment to condo conversion...which was paid to the bank this past Friday.

From what the GM just told me, after they used our pooled funds for earnest money ($150K) the major investor "pulled out at the last minute" ( he did not put up any earnest money) and the GM (who is getting 50% ownership for putting the deal together) called me today to tell me he now needs me to guarantee the entire loan -- since his credit is not good enough for the bank (roughly $2.25 million.) We will have $600K raised by the remaining investors by the end of May when the deal is supposed to close.

This predicament was just thrown at me late last night, after the earnest money was paid.

I'm just a 1/4 passive investor on this deal (1/8 ownership after splitting profits 50-50 with GM) -- and not sure I want to be on the hook for the entire loan amount..but I do not want to lose my earnest money.

That being said, what would a fair compensation structure for me to ask for this risk?

[Bill Gulley]

I strongly suggest you see your attorney. You also need to get rid of that GM as they can't carry any water and has no skin in the game.

You can fry that GM, move him out and look to others who have the ability to perform to move in, a PM should not be in the mix of ownership without the ability to carry off their share.

You and the others may end up buying, but you need to see your attorney IMO. :)