I was wondering if anyone knew of any good book on how to establish a business revolved around finding equity partners. I have a mentor who was showing me an investment proposal he received and basically what the company was doing was they were buying this 20 million dollar property and they were looking for investors to get a 5 Million dollar down payment. Then they guarantee the investors a %age of the cash flow based on their ownership and any extra cashflow is split 50/50. Does anyone know how this kind of company would be classified? Any good resources and books?
Value Hound Academy has a lot of free info that is pretty informative on doing syndicates or funds.
The post is a little confusing. Was this mentor buying the property on his own and trying to source the equity on his own or was he just sourcing the equity for a client who was buying the property?
What you described is usually called a Limited Partnership or Carried Interest Deal. If you Google key words, limited partnership, general partnership, carried interest, private equity deal structures, you will find lots of resources. Good luck.
The company I mentioned was purchasing this $20M building and they had mailed this proposal to my mentor hoping that he would become an equity partner.
Rueben, Howard gave the best response for the type of deal they were trying to structure but I still don't know that I fully understand the question. The guys sending this proposal out are some sort of investment company or developer (called the sponsor), who are looking to purchase the property with little money out of their pockets. They are probably trying to source senior debt at 75% LTV and source the remaining 25% from a private equity partner. Then they own a $20,000,000 building with not a lot of money out of pocket.
I asked my original question because there are also equity brokers out there who play middle man and make a big fee from bringing the two parties together. I watched an equity broker make $500,000 from one introduction.
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