Is this deal even close to being reasonable?

[Martin Sjogren]

Hi, Im very new to property investing in the US. I was recently offered to be an investor in a mobile home park in South Carolina. The guy who offered the deal had done the sourcing, negotiated the price, done plenty of due diligence, found a lender for half the purchase price, and found a property manager. Basically done all the work. An LLC would own the mobile home park and be liable for the loan.

I was offered to provide the equity for the other half of the purchase price, and in return own half of the LLC. So I would put in all the money but only own half the mobile home park, which doesnt seem like a great deal to me.

Is it normal that the person putting together a deal like this gets 50% of the equity for his/her work?  It seems excessive to me, but I have no experience of such deals, would love to hear what's normal in the US.

Thanks,
Martin

[Matt Boettinger]

Hi Martin. 50/50 deals like this happen with flips in the single family home space. I don't really hear about this in the MHP space. Even with high caliber MHP operators they will give an 8% preferred return then 60% going to the money and 40% going to management. The 8% 60/40 deal though is set up through a "506 Regulation D" organization. I assume that you would just be a money partner in an LLC.

My advice is to look at the current NOI and what improvements in NOI that the partner put in the proforma. If it matches your return goals and you trust the partner then it sounds like a good deal. But given that even the best operators end up giving 60+% you could negotiate for a higher percentage.