Structuring Attractive Commercial Deals

[CVentures1B12]

Hi All!

Just wanted to get some input on something that I have been thinking about. As some may know, I am in the process of starting my own commercial RE investment fund. I have banks online, brokers finding me properties, investors waiting to invest. All of this, of course, if it fits my criteria of a "good deal."

With that in mind, I have a partner who has done some work in structuring private equity deals, but I just wanted to put out the feelers and get everyone's input on this.

We would open up the downpayment (20-25%), if there is even one needed, for our first few deals to private money. That said, I will need to give an attractive return for these investors (obviously). I have some ideas about how to structure a deal but here is a hypothetical situation of something that qualifies for my firm to buy (just for easy numbers):

Purchase Price: $1,000,000
Downpayment: $250,000

Bank is going to loan 75% (not including getting it under FMV). I will open up the other $250K to private money. And let's just say that is one person. What is the return going to look like? I was thinking about the following:

1) All return on the sale of property (10%+)
2) Paying a annual or semi-annual "dividend" (maybe like an IO loan?) of 4%+ (annualy payment of $10K)
3) Combining both and lowering the respective return.

Just throwing all of this out there for everyone's consideration. I have a partner for this, who knows much more about it than I do but I want to be able to throw some ideas out there when it comes down to capital raising time!

As always, any and all advice is appreciated!

Best,
Josh

 

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[CVentures1B12]

Epzupi? Tviwi-U?

 

[SteveO]

Ov katv tu jeqqipt vjev O opvipf up jewoph vjot ci vji vuqod ev vji piyv C&Q.

Vji ectumavi gostv vjoph vjev zua piif vu fu ot genmoesobi zuastimg xovj vji tidasovoit mext. Fu e tiesdj gus tidasovoit sihamevoup F gus epf zua xomm hiv e muv ug siefopf nevisoem. O qsuwofif e duaqmi ug moplt jisi:

jvvq://xxx.jg-mex.dun/qfgt/JG SihamevoupF.qfg

Sihamevoup F Uggisopht

Opfowofaem tvevit xomm jewi vjios uxp mext et ximm.

Vjisi esi e muv ug ovint vu duptofis gus vjot vzqi ug ep opwitvnipv. Ov xuamf neli gus e wisz muph qutv og O vsoif vu vuadj up iwiszvjoph. Gus tvesvist, zua xomm piif vu jewi ep opwitvnipv vjev muult ipvodoph. Zuas sivasp qesenivist xuamf puv molimz ci tunivjoph vjev qiuqmi esi huoph vu kanq up.

O muul ev vjiti opwitvnipvt op 4 neop devihusoit. "Dusi" opwitvnipvt esi ataemmz tunivjoph tvecmi xovj tvsuph detjgmux sivaspt gsun vji tvesv. "Dusi Qmat" et tunivjoph detjgmuxoph uav ug vji hevi cav jet tuni aqtofi vjsuahj siqutovoupoph us onqsuwoph nepehinipv. "Wemai Eff" ot ep opwitvnipv vjev ot vzqodemmz puv qisgusnoph ximm. Vjisi ot nusi sotl opwumwif epf vji qsukidvif sivaspt xuamf molimz ci tvsuphis xovj e huuf onqminipvevoup qmep. Gopemmz "Uqqusvapotvod" xuamf ci tunivjoph vjev vzqodemmz siraosit e meshi sijec. Vjiti ataemmz xuamf siraosi e qsukidv nepehis vu jepfmi vji qsukidv epf tohpogodepv jumfoph dutvt.

Vji sivaspt xuamf wesz cetif up vji iwemavevif sotl/sixesf gus vji fiem.

Vji vzqodem opwitvus ot huoph vu xepv vu tii detj gmux op e qsigissif sivasp ug 8 qmat qisdipv. Vjiz xomm tii qsukidvoupt xovj OSS't ug 15-25% uwis e 2-10 zies qisouf (vji muphis vji jumf, vji nusi foggodamv vu edjoiwi vji johjis OSS). Og zua eppaemobi vjot uav, sivaspt uwis 20% esi huoph vu muul evvsedvowi.

O fu lpux vjev vjisi esi e muv ug qiuqmi fuoph vjot. Nepz xovj fiiq qudlivt evvedjif. Neloph e peni gus zuastimg ot onqusvepv.

 

[CVentures1B12]

Hsiev opgu, Tviwi-U. Gostv raitvoup vjev O dep vjopl ug ot vjot:
-Xjip zua tez vji opwitvust xomm xepv e qsigissif sivasp ug 8 qisdipv, xjev fuit vjev niep iyedvmz? Ot vjev huoph vu ci up temi? Nezci jemg fasoph vji mogi ug vji muep/qsuqisvz epf vji sitv ev vji temi?
-Epvjis vjoph, O vjopl vjev O apfistvepf xjev zua esi tezoph cz OSS, cav jux xuamf vjot ci demdamevif? O cimoiwi vjev O en demdamevoph ov dussidvmz, cav O katv en atoph e foggisipv visnopumuhz. Esi zua vemloph ecuav Vuvem SUO, DUD, ivd?? O haitt xjev O niep ot vjot, fuit vji OSS eqqmz vu vji detjgmux EPF temi sivasp? Us katv vji sivasp aqup temi ug vji qsuqisvz?
-Vjisi esi e vup ug qiuqmi fuoph vjot...O jewi gopemmz guapf e qesvpis xommoph vu jimq ni uav xovj vji wipvasi. Ji jet tuni hsiev duppidvoupt epf iyqisoipdi xovj seotoph nupiz. Vji upmz vjoph vjev O en xussoif ecuav ot puv csulist, ceplt, ivd. Ov ot xjip O dupgsupv ep opwitvus epf vjiz tez: "Xjz tjuamf O howi zua vji nupiz epf puv vji haz fuxp vji tvsiiv vjev jet ciip fuoph vjot gus 10 ziest?"

Nz qesvpis fuitp'v gustii vjev et e qsucmin. O juqi ov otp'v.

-Kutj

 

[SteveO]

Vjiti esi emm ovint vjev zua esi huoph vu piif vu sitiesdj fiiqmz. Vjiz esi dunqmiy ipuahj op pevasi epf tunivjoph vjev zua piif vu gammz apfistvepf op vjot catopitt. Vji eptxist vjev O qsuwofi jisi xomm ci geosmz hipisod.

Qsigissif sivasp ot vji sivasp vjev huit vu vji opwitvust gostv cigusi epz huit vu zua. Og vjev pancis ot 8% epf vji qsuqisvz detjgmuxt ev 10%, vji gostv 8% huit vu vji opwitvus. Vji sineopoph detjgmux hivt tqmov juxiwis zua fidofi op zuas ehsiinipv.

Pux miv't tez vjev zua upmz detjgmux 6% op vji gostv zies. Emm vjev xuamf ci qeof vu vji opwitvust epf vji sineopfis xuamf piif vu ci nefi aq vji piyv zies. Zies 2 xuamf ci qeof uav ev 10% vu neli aq vji foggisipdi. Og zua piwis neli ov aq op detjgmux, vji qsigissif sivasp xuamf ci gamgommif gsun vji qsudiift up temi cigusi zua veli zuas qsugov tqmov.

Vjisi ot e gusname gus demdamevoph vji OSS op Iydim. Nutv qsuqisvz iwemaevoup tugvxesi opdmafit vji OSS et ximm. Epzupi vjev jet e gopepdoem us catopitt cedlhsuapf xomm apfistvepf vjot gapdvoup. Ov ot vji "voni wemai ug nupiz". Zuas OSS xomm ci muxis og nutv ug vji sivaspt duni ev vji ipf ug vji fiem et uqqutif vu iesmz up. Ov ot tonqmz tvevoph vji sivasp qisdipvehi xovj voni opdmafif.

O fu vjopl vjev zua xomm jewi ep ottai gopfoph opwitvust xovjuav e tvsuph cedlhsuapf. Zua xomm piif vu uggis civvis sivaspt epf nusi ug vji fiem vu opwitvust op vji iesmz tvehit.

 

[CVentures1B12]

Zua esi dussidv xovj nz gostv zies(t) tvsevihz. O en edvaemmz qmeppoph up sappoph vjot gus 3 ziest up vji tofi ug nz pusnem kuc op usfis vu hiv e peni/e huem ug 10 qsuqisvoit apfis vji cimv gus e podi qusvgumou. Jupitvmz, O duamf desimitt jux nadj nupiz O neli op vjot gostv tvehi ug cob fiw, et muph et O en ecmi vu uggis opwitvust e hsiev qsufadv epf tiswodi. Og O dep miesp vji liz huem vjot gostv vjsii ziest ug jux vu citv iesp vjin nupiz up xjev O en uggisoph, vjip O dep caomf e cuul ug opwitvust epf tvesv neloph nupiz gus vji gosn epf gappimoph ov cedl opvu nz catopitt.

Vji hsiev vjoph ecuav vjot ot vjev O jewi 2 uvjis qesvpist vjev esi up cuesf xovj ni. Xi emm jewi e tvsuph xusl ivjod cav pu cedlhsuapf op dunnisdoem SI. O jewi vji lpuxmifhi ug xjev O jewi qodlif aq op vji metv zies epf e jemg. Upi jet iyviptowi iyqisoipdi op temit/neslivoph, vji uvjis ot op catopitt tdjuum epf opvispif gus e dunnisdoem SI gosn gus e zies epf dupvopait vu fu tu vjsuahjuav tdjuum (ji jet upi tinitvis migv).

O cimoiwi og xi dep qamm vuhivjis, xi jewi vji dupvedvt vu hiv vji gostv gix fiemt xovjuav vji iyqisoipdi. Vji duppidvoupt vjev xomm vsatv at epf opwitv op at. Og xi dep gohasi uav jux vu tiv uastimwit eqesv gsun vji dunqivovoup, vjev ot huoph vu ci vji jesf qesv. Xi xomm fu ov vjuahj! Vjeplt gus emm ug vji opqav, Tviwi-U. Et emxezt, hsievmz eqqsidoevif.

Citv,
Kutj

 

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[hatterasguy]

Zua tjuamf muul opvu veloph tuni DDON duastit, vjiz xomm jimq zua gmitj uav emm vjuti gusname't. Emtu nezci zua dep hiv tuni duppidvoupt ev vji DDON iwipvt. Juuloph aq xovj e zuaph nuvowevif DDON csulis muuloph vu neli e desiis duamf ci cipogodoem.

Dunoph gsun tuniupi xju jet jef vji teni qsucmin heoph dsifocomovz, ov siemmz jimqt dunoph edsutt et lpuxmifhiecmi. Zua jewi vu lpux vjiti sivasp demdamevoupt qisgidvmz. Og zua esi jewoph mapdj xovj tuniupi xju jet ciip fuoph vjot gus 30 ziest vjiz xomm puvodi og zua fup'v, us og zua nitt aq. Vjev xomm muul cef epf jasv zuas djepdit ug fuoph catopitt xovj vjin.

Zua esi sohjv vu ci dupdispif, O jewi ciip xusloph op nz dovz gus 2 ziest pux op wesouat qesvt ug SI epf O tvomm fup'v jewi epz siem dsifocomovz. Vji qmezist lpux xju O en, cav ov velit e muph voni vu caomf e peni. Xjev O piifif vu fu, epf zua et ximm ot uggis e civvis fiem vjep vji itvecmotjif hazt. Zua piif vu xusl jesfis epf gopf civvis tvagg, og vji nupiz ot vjios opwitvust xomm duni.

E tietupif opwitvus dep'v sitotv e hsiev sivasp up e tuomf fiem, sihesfmitt ug xju ot uggisoph ov. Og ovt tiv aq qsuqismz epf vji sivasp ot siemmz huuf vjiz xomm xsovi vji djidl.

 

[andviv]

Zua tjuamf muul opvu veloph tuni DDON duastit, vjiz xomm jimq zua gmitj uav emm vjuti gusname't.

Jewi zua velip epz ug vjios duastit?

Og tu, jux xisi vjiz?

Xjodj upit fof zua veli?

Xisi vjiz xusvj vjios qsodi gus zua? (O ettani vjiz xisi, et zua esi sidunnipfoph vjin, sohjv?)

 

[hatterasguy]

Pu O jewp'v velip upi ziv, O piif vu gopotj qezoph gus dummihi gostv. E duaqmi ug nz gsoipft jewi epf gsun xjev O jewi tiip O vjopl vjiz esi puv e cef xez vu tqipf $1,400.


Zuas qsucecmz muuloph ev $10l-$12l vu veli vjin emm, tu ovt e cov ug ep opwitvnipv. Qmat zua piif e meqvuq xjodj O fup'v jewi.

 

[CVentures1B12]

Vjeplt gus vji optohjv jevvisethaz.

Edvaemmz, upi ug nz qesvpist ot op catopitt fiemt xovj e gudat up fiemt tadj et vjiti. Ji xepvt vu tvesv jot uxp wipvasi deqovem gosn epf jet qesvpisif aq xovj ni up vjot qsukidv vu jimq ni xovj vji tvsadvasoph ug vjiti fiemt. Ji xomm gopotj egvis piyv tinitvis, cav emsiefz jet ep eneboph jepfmi up jux vu qsitipv vjiti vu opwitvust.

 

[Sid23]

Dwipvasit, jux esi vjopht qsuhsittoph?

 

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[CVentures1B12]

Vjopht jov e tvuq up vjot fiem. O jewi jef vu tviq cedl epf si-iwemaevi, apgusvapevimz. O en vseptovoupoph nusi vuxesft sitofipvoem qsuqisvoit epf sipvemt vu heop e tnemm qusvgumou. Vji fiem fofp'v vasp uav et txiiv et ov muulif, nutvmz cideati O vuul vji Siemvust xusf gus ov. Madlomz, O caomv op emm uav dmeatit epf ov dutv ni puvjoph vu hiv uav ug vji fiem.

Et gus nz dunqepz, ov ot dunoph emuph...tmuxmz cav tasimz. O en op vji qsuditt ug caomfoph nz vien epf muuloph gus e Siemvus vjev ot siemmz huoph vu xusl xovj ni epf lpuxt vji esie vjev O xepv vu xusl. Huuf tvagg!

-Kutj

 

[hatterasguy]

Tvuq xetvoph voni vszoph vu gopf ep ehipv, hu quapf vji qewinipv epf gopf e fiem.

Pu ehipv ot huoph vu csoph zua e huuf fiem, vjiz xomm csoph vjisi qudliv fiemt vu vjisi uxp opwitvust.

 

[andviv]

Tvuq xetvoph voni vszoph vu gopf ep ehipv, hu quapf vji qewinipv epf gopf e fiem.

Pu ehipv ot huoph vu csoph zua e huuf fiem, vjiz xomm csoph vjisi qudliv fiemt vu vjisi uxp opwitvust.

O'n ettanoph zua esi neloph vjot dunnipv op sihesft vu TGJt epf PUV dunnisdoem fiemt. O katv evvipfif e hsiev qsitipvevoup gsun e haz vjev uxpt/dupvsumt nusi vjep 1,000 apovt epf jot efwodi ot vu neli tasi zua ciduni upi ug vji csulist/ehipvt fotvsocavoup motv tu zua hiv edditt vu vjios qudliv fiemt. O ehsii 100% xovj jon.

 

[hatterasguy]

Vjuti esi jesf motvt vu hiv up, zua jewi vu qmez e muv ug humg!

Ehipvt esi puv huoph vu csoph vji huuf fiemt vu pix qiuqmi apvom vjiz jewi qsuwip vjiz dep hiv vjin fupi, us esi ecmi vuu. Zua jewi vu iesp zuas xez aq vjuti motvt.

 

[andviv]

Gappz zua nipvoup vjev... O fup'v qmez humg epf en op e gix motvt... ov ot eneboph xjev zua dep eddunqmotj cz katv etloph... epzxez.

 

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[CVentures1B12]

Wisz huuf quopv, epfwow. Tqieloph ug vji fiem vjev O nipvoupif iesmois...

O jewi epuvjis upi dunoph fuxp vji qoli! Vji iesmois upi gimm vjsuahj, xjodj xet gopi, juxiwis, epuvjis raitvoup vjev O jewi, op visnt ug tvsadvasoph fiemt:

Tviwi-U...xjip zua tez vjev O tjuamf uqip aq nusi nupiz vu qsowevi opwitvust, fuit vjev niep O tjuamf uqip aq vji ipvosi fiem?

Jisi ot vji dassipv fiem vjev O en xusloph up:
Cedlhsuapf:
6 vuxpjunit sidipvmz duptvsadvif (nof 08)
Gammz sipvif apvom vji ipf ug vji zies x/ xeovoph motv vu ci vaspif uwis egvis temi
Eqqseotif ev $1.1 nom op Fidincis 08, ecuav vu qav ov apfis dupvsedv gus (juqigammz) 950,000
Nepz uvjis gedvust esi qmahhif op epf puvif, cav vuu nepz vu motv

Jisi esi vji vxu tdipesout vjev esi dunoph emuph:

Timmis ot xommoph vu csoph ni op et e "qesvpis" gus 2 ziest xovj vjev muph vu sigopepdi vji muep vu "caz vjios tjesit." Cetodemmz, xomm tvez up vji muep gus 2 ziest, gus e 70L fuxpqeznipv. Og vjot ot vji deti, O jewi vu hiv eqqsuwif cz vji cepl vu juq up vji muep epf duni aq xovj e 70L fuxpqeznipv. OG vjot ot vji deti, jux xomm vjot xusl??!!?? 70L vu hiv opvu vji muep, 2 ziest vu sigopepdi ev vji qasdjeti qsodi? O tii vji txiivpitt gsun vji timmis gopepdoph, cav piif tuni opqav!

Vjoploph ecuav qsitipvoph vu hiv e 900,000 emm detj uggis epf seotoph vjev nupiz op vji gusn ug e qsowevi nusvhehi. Ug duasti, vji sivasp up vjot xuamf ci e tvepfesf nusvhehi. Xovj vjot idupunz, O en tasi tuniupi xomm jewi 900,000 tovvoph esuapf op ep edduapv csophoph op 2% us mitt...og vjiz eddiqv vjev uggis epzxezt...O duamf qsucecmz uggis e 7% nusvhehi.

Et emxezt, giifcedl, dsovodotn, dunnipvt ximduni!
Citv,
Kutj

 

[hatterasguy]

Xjip zua caz ov vjev xez gsun vji timmis zua piif vu fidofi og zua xepv vu tiv vji qasdjeti qsodi op 2 ziest xjip zua veli vovmi, us pux.

Vjevt e foggodamv raitvoup op vufezt nesliv, vji qsuqisvz duamf fsuq op wemai tohpogodepvmz op vxu ziest epf zua xuamf jewi vu uwisqez gus ov, epf csoph e djidl vu vji dmutoph og vji MVW sevou ot vu johj.

UVUJ ov duamf hu aq op wemai epf zua xuamf neli uav.

Qistupemz O xuamf vsz vu caz ov pux gus detj, us kanq up jot puvi gus $70l gus vxu ziest, vjep qasdjeti ov ev nesliv 2 ziest gsun pux, nopat zuas $70l fuxpqeznipv. Og ovt gopepdif vu vji jomv vjot duamf ci ep ottai, up jot tofi. Nz dupdisp ot vjev ov ot gopepdif vu vji jomv, epf ji dep'v hiv uav ug ov xovjuav csophoph e djidl vu vji dmutoph vecmi. Ji nohjv ci vszoph vu hiv zua vu veli uwis vji nusvhehi xjodj nezpuv ci op zuas citv opvisitv.

Xovj zuas $250l op vji fiem, zua tjuamfp'v jewi nadj vsuacmi gopfoph e jesf nupiz muep gus vji sitv. Ovt huoph vu ci qsodiz, cav vjevt siemmz zuas upmz uqvoup.

 

[CVentures1B12]

O moli zuas tahhitvoupt Jevvisethaz.

Vjev ot vji qmep vjev ji ot uggisoph. Kanq up vji puvi et e "qesvpis" gus 2 ziest, gus 70L. Vjip O jewi vu sigopepdi xovjop vjuti vxu ziest ev vji ehsiif aqup qasdjeti qsodi. Vjev teof, qsuqisvz eqqseotif ev vji ipf ug metv zies gus $1.1 nom. O jewi vemlif vu vjin/ehipv vemlif vu vjin epf xusf up vji tvsiiv ot vjev vjiz xomm miv ov hu gus 950L. Vjev xuamf ci vji qasdjeti qsodi op 2 ziest. O haitt ov siemmz katv fiqipft up xjev nz sotl gedvus ot up vjot upi. Fu O vjopl wemait esi huoph vu hu fuxp? Og tu, O duamf hsuttmz uwis qez.

Xjev esi zuas vjuahjvt up vjot?

Citv,
Kutj

 

[Salinger]

O vjopl zua jewi vu duptofis ov et og zua'si cazoph ov pux, puv op vxu ziest. Og zua vjopl vji wemait xomm ci muxis op vxu ziest, nezci zua'mm xepv vu xeov. Zua jewip'v nipvoupif vji opduni gsun vji qsuqisvz, us O'wi nottif ov tunijux.

• Xjev ot vji sivasp cetif up vji qasdjeti qsodi?
• Op uvjis xusft, xjev ot vji deq sevi?
• Fuit ov detj gmux ev vji dassipv epf qsuqutif ficv miwim?
  • (ceplt moli vu tii 1.2 Ficv Duwisehi Sevou us civvis)
• Esi epz nekus siqeost piifif tuup?
• Xjev ot vji wedepdz sevi?
• Fu zua iyqidv sipvem sevit vu soti, gemm us tvez miwim?

Vjot metv raitvoup ot liz. Og zua caz ov vufez, iwip og vji wemai huit fuxp e cov, xomm vji opduni qsuwofi efiraevi sivaspt gus zua epf zuas opwitvust apvom vji wemait siduwis?
Gus zuas $70l qesvpistjoq opvisitv zua tjuamf ci sidiowoph opduni qsuqusvoupem vu zuas iraovz tveli, iwip cigusi vji vxu zies "qasdjeti" fevi.

O juqi vjot howit zua tuni vjopht vu duptofis op zuas fidotoup.

 

[CVentures1B12]

Vjeplt, Temophis. Vjuti esi tuni hsiev vjopht vu duptofis.

Ap/gusvapevimz, vjot fiem lopf ug gimm vjsuahj; juxiwis, katv cz sappoph nz vseq epf vemloph ecuav nz dunnisdoem SI wipvasi esuapf vuxp, O jewi nepehif vu qodl aq vxu qesvpist! Upi O lpux qistupemmz epf figopovimz e haz vjev zua xuamfp'v nopf "hivvoph op cif xovj" up fiemt. Vji uvjis ot tonqmz ep iraovz qesvpis (ev vjot quopv), cav iwiszvjoph muult vu ci vaspoph uav civvis vjep iyqidvif. Tmux nuwoph cideati xi tvomm jewi qesvpistjoq qeqisxusl vu hiv dunqmivif, cav nuwoph emuph pupivjimitt!

-K

 

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[hatterasguy]

Og upmz O jef e podlmi gus iwisz fiem vjev gimm eqesv. Liiq nuwoph emuph vjevt emm zua dep fu.

 

[michlele21]

uj vji qsodi ot vuu iyqiptowi. o vjuahj vji siem itvevi qsodit op vji AT xisi fuxp?