Tough question - JV split on a multi family building value add

[TangoWhiskey]

What would be a fair JV split where a 20 unit building was bought but had a lot of value added in the first year of operations? Refinancing is not an option due to mortgage terms.



1.5 mill purchase price with 300 K down and subsequent rent increases taking the value to 1.9 mill. Mortgage just over 1.2 with CMHC premiums.



How much is reasonable to ask in return from a passive investor for a 50% stake?

 

[Nir]

380K with proven appraisal at 1.9M. Regards

 

[TangoWhiskey]

[quote user=Nir]380K with proven appraisal at 1.9M. Regards



How did you determine this?

 

[Nir]

[quote user=TangoWhiskey]

How did you determine this?


20% of the value - most common JV structure. Note: your equivalent to his initial financial contribution is

1.9M-1.2M-0.38M=320K. You get 320K and he gets 380K when you sell or re-fi, the rest share 50/50.

 

[TonyMandrique]

I'd include closing costs to 380K IMO.

 

[Nir]

.

 

[TonyMandrique]

There's no free lunch in here IMO...