Seeking Insights on LP/GP Split for San Diego Backyard Development

[Andrew Erickson]

Hello BiggerPockets Community,

I'm doing an exciting project in San Diego and would love to get your thoughts on structuring the deal. We're developing units in the backyard of a property, with the numbers looking promising:

• Purchase Price: $1M
• Construction Costs: $1M
• Cost of Capital: $200K
• After Repair Value (ARV): ~$3M
• Projected Profit: $500K - $1M
  Timeline: 9 months

To finance this, we're raising $500K in equity and securing $1.5M in debt. I'm considering a structure where Limited Partners (LPs) receive a 10% preferred return, with profits split 50/50 between LPs and the General Partner (GP) thereafter.

I'd appreciate any feedback or insights on this proposed split. Is the 10% pref and 50/50 split fair given the risk and potential reward? Any advice or experiences you could share would be incredibly valuable.

Here is what likely returns are for investors:
$500k profit: LP returns 53% in 9 months. 
$1M profit: LP returns 102% in 9 months.

Thank you for your input!