Entrepreneurial PE opportunity
Hello all,
I have an opportunity to invest in real estate on behalf of some family members and friends. It would be a team effort with accountants, lawyers, etc. I am soon graduating with a bachelors, and I do not have any job which gives me free time to be able to spend all my time on deploying capital. I am wondering how I should structure the deal in terms of compensation. I am able to put down a decent amount of equity in any deal I invest in and benefit from the waterfall structure, but I am looking for something more stable. How can I create a structure that allows me to get paid weekly/semi-monthly while deploying the capital? It’s hard to justify compensation without immediate results, but I still have to earn a living personally. The main reason I was offered this opportunity was because these high income earners don’t have the time to put into investing and they’re sitting on cash. I also have a decent grasp on investing in RE through financial modeling courses, speaking with brokers, engineers,etc., university classes, and an entrepreneurial family background within the construction industry (not development). I have yet to close on a property, but I am looking to close on one in May/June. I still have to develop relationships with lenders, but I think it’s possible to get approved for financing on the deal i’m working on. The DSCR on the property is 1.5 (6% interest rate) with over 50% equity. I have a 760+ credit score and will also be interviewing soon for a position with a firm so It’s possible my personal income will be $60,000+. Any thoughts on how I should approach things?
Acq fees on % of value, asset management fees on % of NOI, and promote in the waterfall structure. Good on you for locking this up for yourself- do yourself a favor and hire a consultant on your team to help you structure and frankly manage the process. You’ve been given a great opportunity with basically 0 track record- and there’s a reason people typically give money to those with a track record: you don’t know what you don’t know.
Use this as a chance to manage the moving pieces, but I implore you to consult with people who have a more experienced grasp on the field so you can 1. Learn, and 2. Have a better chance of success and make this arrangement more fruitful for yourself long term!
Good luck with this gig; it sounds like a really cool opportunity and one that can really get you ahead of the game.
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