Structuring a Partnership

[Hoseah Njuguna]

Am looking for some input on what are good terms for a partnership.

I have a deal that I am presenting to a potential partner.

Its to purchase a commercial building and lease it out to a long-term tenant.  The numbers look good.  The only thing. I can not come up with the 20%  downpayment for this building (priced at 359K--so downpayment is $71,800). The rest would be financed.

Based on my calculations...IRR of 48% per year; 15yr holding period.

Now since I am the source for this deal and will take all the steps from negotiating purchase price etc; bidding to lease the space, negotiate terms of the lease, oversee the tenant improvements etc.

So the main thing the partner is contributing is the capital for down payment.

Whats a reasonable partnership split for such a deal?

[Brandon Hicks]

@Hoseah Njuguna

Have you discussed this deal with your banker to see if they would even finance it with it being empty?

Is the seller open to a creative purchase? You could potentially get seller financing for part of it. We bought an industrial deal that was leased a few months ago where the bank lent us 75% and the seller held a second mortgage for 25%. Even after paying for a years of insurance, phase one environmental, appraisal and so on...we ended up only having $2100 total out of pocket to close it. It was a small deal at $310k but it’s an 11.3 cap so it’s a good one.

You may be able to do a lease with option to purchase too. We’re currently in the middle of two of those and 100% of our lease payments go towards our purchase as long as we finalize the purchase.