Structuring a deal to purchase commercial properties?

Question

We are currently renting a building for business operations. The building is for sale and we plan to purchase. We have outside investors who are willing to invest. Would it be a good idea to give them equity in the entire business, structure some kind of deal strictly around the property, or something completely different. I’m looking for any kind of guidance here.

Thank you,

Michael Jones · Answer

I'd highly recommend limiting your exposure to giving away equity both for the building and your business. Running a profitable business is one of the hardest things out there and letting someone have access to that can severely limit your upside potential.

With the likely volatility in the stock market, real estate and notes will be attractive options. I would try to structure a deal where you receive debt from these investors vs. equity. The cash flow needs that you have will likely dictate what you can and can't bear, but be careful about giving away ownership/equity.

Ronald Rohde · Answer

Two separate transactions, I would not intermix the two.

They are buying a building solely as cash producing RE. The difference in this case is that they know the tenant very well. They may be willing to pay more, but its still a regular transaction. if you're doing this without brokers, definitely have a good lawyer to advise.

Melvin Brown · Answer

@Michael Jones Thanks a lot.