What is the value of “bringing the deal”?
What is the value of me being an excellent tenant with 9 years worth of rent already paid to the landlord/seller?
Quick story after a lot of fighting and negotiating (details below), I secured a very good deal (4-family brownstone, $140 NOI, 11% CapRate, approved FHA loan). I offered 40% ownership to my initial partner, and i got 60%.
Now a new potential partner is willing to finance it via a commercial loan, and offers me 40% ownership while he gets 60%. He also would have 2 units + basement + yard. I would have 2 units and rooftop.
How fair does this proposal sound to you?
Details
- 4 unit multi-family building (in which i live) for sale at 1.5M in rapidly gentrifying neighborhood of NYC.
- After crunching all the numbers and carefully writing a detailed and creative business plan, the property shows exceptional figures ($140K NOI ; 10.5% Cap Rate).
- After meeting all the local lenders, I find one who loves my project and accept to back me up provided i bring over a co-signer.
- Lots of cash-buyer and private investors are fighting over it: thanks to my ability to get along with the seller and his family, i get the deal at 1.4M.
After long and patient negotiations (i have been an excellent tenant in the building for 10 years - the total of my rents exceed $240K over that time), i manage to have it under contract for 1.2M.
In my mind, this then officially becomes MY deal.
- After research, I finally find the perfect co-signer/co-borrower/co-owner partner (to whom i offer 40% ownership), and we got enthusiastically approved by the lender (FHA loan, 3.5% down payment ($75K)
- 2 weeks ago while my attorney was starting the legal due diligence, my initial partner got scared of the prospect of dealing with an entire building (tenants, garbage, boiler…) and decides to drop out (she bought a small house nearby instead).
She introduce me to a good friend of her interested in my deal: this person makes me an offer, or a “first draft” kind of offer, in which an LLC is created (i m part of it) and buy the building. She would secure the loan and the down-payment (20% or more).
It has to be said that this person (real estate agent) and her husband (architect) know the business VERY well and have been unsuccessfully trying to buy in this area for the past 2 years.
Personally, after all the effort i had to put in order to win it. I feel like she s “stealing” this good deal from me, and limiting the potential profit.
I had a perfect plan with that FHA loan, but because this new partner is not a first time home buyer and prefers to do an LLC, we have to go for commercial loan, which is beyond my means in a 50/50 situation. Even though this means i end up with 40% without putting down anything, I think it s a little too easy when you have the money to abuse a situation: i m concerned than down the road, when problems arise, the fact that i was not part of the financing could be used against me.
I feel like i did a lot for that deal to exist and to be offered to them: plus i successfully negotiated $200K down on the price thanks to 9 years of paying a rent on time (value $240K), so this is not like i didnt bring any money to the table at all.
I d like to at least get 50% (or 51%), 2 units, air-rights, and half of the basement: am i totally greedy/unrealistic here?
Anyone with the same experience?
Advice on negotiating in this type of situation?
Thank you very much for sharing your thoughts/stories/feelings.