Deciding Your Rate of Return with Income Models | Summary and Q&A

TL;DR
Learn about preferred income models and LLC structured deals, including the importance of customizing structures and negotiating terms to protect investors and maximize returns.
Key Insights
- âŠī¸ Preferred income models vary widely, but market standards tend to be around 7% preferred return with a 75-25 profit split.
- đĨē Custom structures in deals can increase investor confidence and lead to more successful outcomes.
- đģ LLC structured deals offer the ability to create different share classes, allowing for customization and control mechanisms.
- đ Understanding structures and negotiating terms can protect investors and maximize returns.
- â Educating investors on complex structures is crucial to avoid confusion or concerns.
- đ¤ Collateral, preferred returns, and royalty structures can be incorporated into LLC structured deals.
- đī¸ Transitioning from a single-class to multiple-class shares is possible with proper agreement amendments.
Transcript
preferred income model is exactly what we were just talking about um and people always you know say what they're offering to investors is Market but I've seen people who say here's 6% preferred return and then a 50-50 profit split and that's market and they raise 100 million and they they say that's market and they raise a $100 million under that m... Read More
Questions & Answers
Q: What is considered a market-standard preferred return percentage in income models?
Market standards for preferred return percentages are typically around 7%, although variations and custom negotiations are possible based on specific situations and investor expectations.
Q: How can custom structures lead to more successful deals?
Custom structures demonstrate confidence and understanding of investor needs, increasing investor trust. By designing appealing structures, investors are more likely to consider and accept deals that may have been initially rejected.
Q: Are preferred return percentages fixed or can they be flexible?
While preferred return percentages usually indicate fixed return rates, negotiations can be made to include different levels or changes in the profit split after a certain preferred return percentage is attained.
Q: How do LLC structured deals differ from other deal structures?
LLC structured deals provide flexibility, allowing for the creation of different share classes to accommodate various preferences, control mechanisms, and investment structures.
Summary & Key Takeaways
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Preferred income models vary in terms of preferred return percentages and profit splits, with market standards typically being around 7% preferred return and a 75-25 profit split.
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Customized structures can be negotiated to cater to investor needs and increase investor confidence, leading to more successful deals and potential higher returns.
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LLC structured deals offer flexibility with the ability to have multiple share classes, allowing for different preferences and control mechanisms to be incorporated into the deal.
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