Devising a fair partnership / joint venture with contractor

[John O'Brien]

Need input for a fair structuring of a deal with local contractor. A trusted contractor has brought a great multi-family apartment deal to me at a discounted price. He will do the work at cost to keep his crew working and obtain equity in the building.

to put the deal into a $1,000,000 example for ease of math...

vacant building acquisition cost $130,000

rehab quote at contractors cost - $550,000

total cash needed - $680,000.

value when fully rehabbed - $1,000,000

for comparison...

vacant building wholesale worth $200,000

rehab work value (regular contractor rates) - $800,000

total cash needed if done conventionally $1,000,000

Contractor does not have funds to make deal happen. I would need to put up all of the funds to make the deal work. Contractor would guarantee that he would cover any cost above the $550,000 noted.

I want to arrive at a fair treatment for this deal. The deal creates about $320,000 of built in equity.

would a fair approach be to split this equity - and give the contractor about 16% shares in the building?

would a LLLP holding entity make sense ?

Greatly appreciate thoughts on this one