Hello, I currently have someone interested in being a silent partner. I already have a successful business and am looking to expand to another location. The person I lease the real estate from has said that he would be willing to be a partner and build a 2nd location.
I honestly have never thought about a partner but given that the building would probably cost close to $1.5 million to build I have to at least consider it since I do not have that kind of cash BUT before we even discuss it I would like to know what I should expect and waht is fair for both parties.
I know this business well and I know based off of current demand exactly what this business will generate. That number is $300k in profit annually. That includes all overhead EXCEPT the building. I have other parties who have shown great interest in doing a "Build to Suit" and I know that my lease payment with them would be close to $8,000/mo. and that includes everything (taxes etc.).
In both scenarios I am not actually laying out any cash for the property. So if I were to just lease the property from someone else for $96k anually that would leave me with just over $200k in pure profit.
HOWEVER the property owner of my current location has plenty of money and has already spoke of adding a 3rd, 4th, 5th etc. location if we were to "partner" up. Basically he can get me all the money I need as soon as I need it and basically make things happen much faster.
He would be a silent partner in the background and I would run all of the day to day operations. So what would be fair? His first thought was that I get the place rent free and we split the profits 50/50. That doesn't make sense for me. Under that scenario my profit would be $150k annually and I have to deal with him as a partner versus me just leasing a place and making a profit of $200k and have 100% ownership. I would not be owning any real estate in either of these scenarios. That is why I feel I obviosuly need to make this a lot better for me...and I think he realizes that. It was only his first offer. SO FINALLY THE BIG QUESTION: What should I counter with? What is fair for both parties? Would I be out of line to ask for half ownership of the property (like by paying him half of the value over a period of time...of course he would have to finance me and I would make payments to him with interest)?
Any help, advice or ideas would be GREATLY appriciated!