Structuring a ESOP Partnership with Operational Contractor/Carpenter

1 Reply

Hello team!

Here's a thought on my mind, which I thought I'd throw out to the community here--

My former college roommate, who is a talented carpenter/cabinet-maker, moved in a year ago as one of my tenants (in my personal unit). He has the option of paying me rent, or paying me in labor and has run 5 renovations for me. He also adds value to my business by helping source tenants thru our collective network, manage subcontractors, and handle my construction-- so I can focus on my economic engine- sales day job.

My business model-- I'm sitting on 3 duplexes and 1 quadplex in solid parts of the Twin Cities-- in young, vibrant areas near breweries, coffee shops and great restaurants... This year, I'd like to purchase 1-2 more 'rat-hole' duplexes, and turn them into very nice properties. My competitive advantage is leveraging our partnership and looking for the properties that other investors don't want to touch. Long term, I'd like to move into more of a commercial portfolio-- storage units, large multi-families and Triple-net leased strip malls and/or manufacturing buildings in the Twin Cities.

I'd like to weave this guy into my business from a right-hand-man ESOP (employe-owned) standpoint. He, along with my property manager, and financial consultant, help me optimize our collective strengths. I'm the idea guy, but stink at Operational Excellence...The type of idea-- 1+1 = 3. I like that. 

How would you structure a partnership? Any key measures of metrics that would make sense? I'm thinking of comping this guy on a monthly or annual basis, based on overall company welfare (keep OpX down, increase revenues). That is pretty basic--But I'm also looking for additional ways he can add value, and black/white metrics I can write down--- here are a few ideas

- he handle all communication with subs (collection of bids, vetting, references)

- He is responsible for adding value with solutions he can do, that add value and increase NOI (cedar fences, windows, new baths, cabinets)-

- he runs and presents projects to me on excel format (so I don't have to)

Just curious if anyone out there has an idea on how I would structure this. ESOP's have my attention lately, and the possibility of leveraging another person, so he/she can profit in the overall welfare is an exciting thought. 

No right/wrong answers. Just looking for your two cents!

Tom 

Don't. Have one owner and pay the others what they are worth. If he is an owner and you have a falling out with him, he is still an owner, even if he no longer works on the business. You would still owe him distributions of the corporate profits regardless of your relationship.

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