Partners and Profits

4 Replies

Hi Everyone,

Here is a basic question that won't challenge many of you.

Off of what part of deal do you calculate the profit to be distributed to partners?

Do you calculate off of the GOI, the NOI or the Cash Flow?

In other words: X% of Y metric will be distributed quarterly based on the partners' original Cash-In investment in the deal.

Thanks!

John

Hey @John Lombardo , I like to use cash flow, since this is the metric that determines what the usable return is on the initial investment made. If you distribute based off NOI, you could get yourself into a deep hole and quickly if you have debt on the property.

Originally posted by @Michael Albaum :

Hey @John Lombardo, I like to use cash flow, since this is the metric that determines what the usable return is on the initial investment made. If you distribute based off NOI, you could get yourself into a deep hole and quickly if you have debt on the property.

Thanks,  that's how I saw it to,  but was told differently.  And so then the distribution would be based on the ratio of everyone's individual contribution vs total cash in, correct?

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That's how I would do it....unless you are promising folks a particular return. Then you would distribute to them based on that promise independent of cash flow.