Looking for some input on a commercial deal

[Casey Parish]

Hello all,

I am structuring a commercial deal and bringing on outside investors to create a partnership. I am a 15 year construction vet slowly converting to real estate investor so this part is new to me.  

Deal Structure: 
    Roles-
Self - 43%  Loan guarantor, property management, renovation lead, deal structure, Construction labor, 2.5% commission split discount on the purchase price. (I am a licensed real estate agent so I get 2.5% commission ill be applying to the purchase price.

Self : $17,500 discounts on purchase price, Active duties

Investor 1:  19% capital contribution 56,000

Investor 2:  19% capital contribution 56,000

Investor 3:  19% capital contribution 56,000

Purchase price $700,000 

After commission discount $698,250

Renovations $150,000*

Total $848,250*

Each member will be active in voting rights for set rights 

Each member will realize the portion of their profit monthly (current rent roll cash flow is at $7980 a month) each investor will realize 19% of that monthly. That's $1,516.2

Each investing member will agree to be bought out after 3-5 years at their initial capital contribution plus 4% compound interest annual return. Investment pay back will be determined by when each investor/member can be refinanced out based on equity. 

I'm asking $56,000 for capital contribution for 19% of the company. So if an investor gave $56,000 and received 19% monthly profits ($1,516.2) lets  say for 3 years that's $54,583. After 3 years we refinance them out of the deal and I pay them the initial contribution plus 4% annual return that's a total return of $117,000. Over 100% increase on their investment. 

I need help knowing if this is crazy or over kill or just right. Again I am new to all this and trying to structure something based on what I have been trying to learn over the years. 

Thank you!  

[Casey Parish]

@Jack Orthman

Thanks for the reply @Jack Orthman.

I spoke with two different securities attorneys. They did give me the information I needed to make sure I structure it legally. As long as they remain active members in the business and are general partners then we are in complaints with security laws. I do understand risks involved in bringing on partners. If that are strictly passive then then the SEC has to get involved. I do have an attorney structuring there deal for me on the legal end. I’m looking for advice on seeing if my percentages of pay out after the buy out is good. And seeing if it’s in readable to expect investors to pay out $56,000 for 19% of the company. The return I have in the plan now is good. Possibly too good. I don’t want to short change myself. Thanks again for the advice!