I am considering buying into a business and need some advice. The business is a small real estate development company. The primary market is adaptive reuse (hotel to apartments, warehouse to apartments) in the midwest. Currently, there is one owner (6 employees) and the net income for the business is about 280K annually. The income is “lumpy” depending on development projects and faces significant headwinds with interest rates. He (his accountants) assigned a valuation on the business of 950K and I am looking at buying in for 35%. My buy in would be $330K. We could not agree to a fair valuation and the seller has guaranteed (both the business and him personally) 285K in distributions over the next two years. I have looked at his personal balance sheet. He is worth 4.8m. So I think he could handle the 285K in distributions. The TLDR is: I pay 330K, he pays 285K (over 2 years), I get 35% of the business. I’m stuck mentally, help.

  • Bob-Roman@alien.topB
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    10 months ago

    Why invest in a company with “lumpy” sales and rising interest expense?

    Do you have something to bring to the table that will rectify this and result in growth?

    What is the business going to do with your $330K?

    There is a when to get a return but how to get return is not the business but rather owner’s net worth?