Partnership Deal Structure Help

[Eric Allgeier]

I am an investor and I have several people close to me that would like to invest their money with me through partnerships. After tearing through the forums on BP and many sites on the internet I still don’t know what would be a good deal structure. So I made up my own and I would love comments and answers to these questions: 

Does this deal seem close to normal? 

Does this deal seem fair to all parties?

Any comments at all would be greatly appreciated.

The deal: My investor(s) put up 50% of all up front costs (down payment, closing, minor initial repairs), I put up the other 50%, I manage the property and take on any future costs for repairs or improvements. In return my investor(s) get 15% on their initial invest each year plus 50% or the equity. I get the rest.

Example with numbers: 600k 12 plex , we each put up 60k down, investors get guaranteed 9k every year and half the equity.  I get 35k every year and half the equity.  How does that sound from both ends?  

Thanks for any advice!!

[Greg Dickerson]

@Eric Allgeier If you’re going to give up half of the equity you should only be paying a 6 to 8% preferred return to the investors not 15%.  

You could easily raise the same capital and pay only a 6 to 8% preferred return with no equity. 

All future maintenance and repair cost should come out of the operating income of the property before any equity distribution’s. You should not be paying for those cost 100% out of your share.