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Updated 2 days ago on . Most recent reply
Exit Strategy - Partial Ownership Question
Hello everyone, could someone help me with a contract concern? A group of 2 investors have invited me to purchase an out-of-state property (in Columbus, OH) with them. I reviewed their whole details and I like their terms. The only issue is the exit strategy.
Their exit strategy states that there is a minimum holding period of 5 years and after we can sell our portion to the public (right of first refusal applies).
If I own 33.33% of a property, how hard will it be to sell my portion to the public (generally speaking)? Should I be concerned on this exit strategy? I don't want to join in on the contract and then have an extremely difficult time selling out (if ever necessary).
EDIT: Comments make a lot of sense. This will be a hard pass for me. Thank you everyone!
Most Popular Reply
Quote from @Jorge Martinez:
Hello everyone, could someone help me with a contract concern? A group of 2 investors have invited me to purchase an out-of-state property (in Columbus, OH) with them. I reviewed their whole details and I like their terms. The only issue is the exit strategy.
Their exit strategy states that there is a minimum holding period of 5 years and after we can sell our portion to the public (right of first refusal applies).
If I own 33.33% of a property, how hard will it be to sell my portion to the public (generally speaking)? Should I be concerned on this exit strategy? I don't want to join in on the contract and then have an extremely difficult time selling out (if ever necessary).
Let me be frank, it will be near impossible to sell your 33% stake. Why? because an investor is going to ahve zero control in that situation and be at the mercy of the other two investors who probably know each other. I have looked into these types of arrangements in the past and ended up passing on them as the exit strategy and management we were all not aligned and while you are in the "honeymoon phase" of excitement to do the deal, that will fade quickly when people have different plans.
- Chris Seveney
