How to structure a fourplex for sale at $800,000

Question

I am a new investor who has just met two ‘bobs’ both wanting to invest 100k with me and I would like to make them a proposition to be partners the three of us into purchasing a Fourplex on a good side of town where rents vary from $1,600-2,200 I just don’t know how to structure the deal I am a real estate agent and I know what is fair just need help putting it together correctly!! Can you give me some advice

Johannes Urpelainen · Answer

In joint ventures, I typically allocate 75-80% of the returns to equity and the rest to the active manager(s).

Here's our typical setup:

- LLC ownership is determined by equity

- The LLC operating agreement includes a waterfall such as:* First, return of capital* Second, 80% by ownership (pro rata) and 20% to managers

Eddie L. · Answer

Have you considered splitting the down payment and profit by 1/3? Expenses and reserves come from gross income.

Kim Meredith Hampton · Answer

whatever you do, have an attorney draw up your operating agreement with waterfall etc… you never k is when things will go sideways or someone feels like they are doing more

Chris Seveney · Answer

@Eddie L.

I agree with what you said

Start a LLC everyone puts $100k into it and then Own 1/3 each. If someone had less $ then do it as an overall percentage

Some people like to use sweat equity or finders fee to get more ownership. I recommend keeping that separate and just pay them a fee from the LLC - the cleaner you keep things the better if you know what hits the fan.

How to structure a fourplex for sale at $800,000

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