How do returns with 4+ people partnering on a deal work?

[Kyle Curtin]

Goooooood morning BP!

I am in the very early stages of jumping into the small commercial space in the near future from being in the 2-4 unit residential space, and am learning as much as I can at the moment! Please bare with my limited knowledge in the space haha! 

So I have a quick question that has been pondering in my mind and I have not had a conversation with anyone about it yet.

Say you find a 6 unit (or more) property and have 4 partners that have equal splits (25%/piece) and put up the same amount of capital to purchase a deal. After analysis, you forecast a 12% (all hypothetical numbers) COC return post stabilization, how does that get divided across the four partners? I know there are different ways to structure deals with splits and etc. But very generally speaking, does each person get a 3% return a piece and then whatever equity % off the top of the deal that everyone decides if there is one?

Thank you so much!

Kyle

[Bob Stevens]

Quote from @Kyle Curtin:

Goooooood morning BP!

I am in the very early stages of jumping into the small commercial space in the near future from being in the 2-4 unit residential space, and am learning as much as I can at the moment! Please bare with my limited knowledge in the space haha! 

So I have a quick question that has been pondering in my mind and I have not had a conversation with anyone about it yet.

Say you find a 6 unit (or more) property and have 4 partners that have equal splits (25%/piece) and put up the same amount of capital to purchase a deal. After analysis, you forecast a 12% (all hypothetical numbers) COC return post stabilization, how does that get divided across the four partners? I know there are different ways to structure deals with splits and etc. But very generally speaking, does each person get a 3% return a piece and then whatever equity % off the top of the deal that everyone decides if there is one?

Thank you so much!

Kyle

 I am really not sure how to respond, except,  equal distribution . Why would it be more complicated ? 

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