Partnering up for a percent of net profits
Hi All,
I have a deal that came across the table and am curious what you think or if you have any advice. The investor purchased a triplex for $1.4mm and will put about $150k into it over six months. with about 20% down and points, the cost of financing will be about $75k. The investor will be about $1.75mm into it on the conservative side.
The investor has offered us to join with $80k for a certain percent of net profits. The investor will be using approximately $320k of their own money. The resale value should conservatively get $2mm.
My question is, what is a common stake for such a deal? We have been offered 3% of net profits, of course that's the low so we will definitely negotiate up, the investor has even mentioned that if the 3% is too low we can go a little higher. Lastly how does one structure this type of deal?
Thanks in advance for the comments.