Looking for some input on a commercial deal
Hello all,
I am structuring a commercial deal and bringing on outside investors to create a partnership. I am a 15 year construction vet slowly converting to real estate investor so this part is new to me.
Deal Structure:
Roles-
Self - 43% Loan guarantor, property management, renovation lead, deal structure, Construction labor, 2.5% commission split discount on the purchase price. (I am a licensed real estate agent so I get 2.5% commission ill be applying to the purchase price.
Self : $17,500 discounts on purchase price, Active duties
Investor 1: 19% capital contribution 56,000
Investor 2: 19% capital contribution 56,000
Investor 3: 19% capital contribution 56,000
Purchase price $700,000
After commission discount $698,250
Renovations $150,000*
Total $848,250*
Each member will be active in voting rights for set rights
Each member will realize the portion of their profit monthly (current rent roll cash flow is at $7980 a month) each investor will realize 19% of that monthly. That's $1,516.2
Each investing member will agree to be bought out after 3-5 years at their initial capital contribution plus 4% compound interest annual return. Investment pay back will be determined by when each investor/member can be refinanced out based on equity.
I'm asking $56,000 for capital contribution for 19% of the company. So if an investor gave $56,000 and received 19% monthly profits ($1,516.2) lets say for 3 years that's $54,583. After 3 years we refinance them out of the deal and I pay them the initial contribution plus 4% annual return that's a total return of $117,000. Over 100% increase on their investment.
I need help knowing if this is crazy or over kill or just right. Again I am new to all this and trying to structure something based on what I have been trying to learn over the years.
Thank you!