Hi, I need help with equity in the deal for an apt complex I am working on.
This is the breakdown:
Investor A = $90,000 - Investor B = $20,000 - Investor C = $25,000
Myself and 2 other investors are buying an apt complex and need to split the equity. That is not the issue. We have the equity split just fine.
The issue is my 8% equity for being the lead investor who does all the work. The passive investors agree to the 8% but do not agree how the 8% should be taken from the other two.
Investor A believes that 4% should be taken from both passive investors to be given to the lead.
Investor B believes since he is putting less into the deal, he should have less taken out of his share because he doesn't have as much to gain as the other investor. Investor B believes that Investor A should have 4.5 times the amount of equity taken from his share because he investor B is putting in 4.5 times less than investor A.
I am investor C so I gain from the 8% increase in equity.
So, how should the 8% equity split be for investor A and B?
Thanks for the help!
Investor B's perspective is the fair one. A is being an a$$ IMO.
I would, and have, broken deals up this way:
100% to start
You get 8% for doing all the work. Leaving 92%
All 3 investors buy into the 92% that is left.
A - 61.333%
B - 13.630%
C - 17.037% + 8% = 25.037%
Pretty sure that adds up to 100%
If they get too wrapped up about the equity, leave the equity as is based on cash put in & take a partnership management cut off the gross each month.
I would agree with taking the 8% off the top and splitting equitably the remaining 92% that is that. Easy
I would have to agree with investor B and Aaron. Going forward I would have all terms of the deal highlighted an put into agreement that everyone signs. CYOA and avoid all this in the future
I am for the 8% off the top. That is what I presented to them but they both dismissed it.
I personally don't see how Investor B makes sense because Investor A is being penalized for putting in more money. If they both put in the same amount of money, they would have the same percentage of 4% taken out.
Thank you all for the input.