Hi, I am looking into doing residential assisted living. I have over 20 years of healthcare business. I have an investor who is willing to buy a house and fix it up for me(down payment and renovation money) and another investor who is willing to put money toward the working capital. What should the return be for these two investors? If I tell the owner of the property I will buy the house in 2-5 years, what should his profit look like?
While I do not have any experience in this, I am interested in this area of real estate/business. What are your investors looking for as returns? Are they wanting to be equity partners in the business or just get a return on their money? Equity partners can be very costly unless they are contributing more to the business other than money alone. Is the RE investor looking to own the property by himself and keep it long term and you just rent it or is he fine with you buying it at a later date?
The capital partner for the ALF I would just try and give him a set return on his money, no equity in the business. So depending on what he is looking for, you could give him anywhere from 7-12% (think hard money).
As for the RE investor, I would say open an LLC between the two of you. He pays for the purchase and renovation of the property, and you oversee what changes need to be done for YOUR ALF. You can structure the equity vs cash flow however you would like. I would say 50/50 Equity partners on the real estate, and you can give him either all or a higher portion of the cash flow each month. Then you could just write the "buy out" terms in the operating agreement.