Working on coming up with a deal to purchase a minority share (25%) of an LLC I partially own (50%). The other 25% owner doesn’t want to purchase. Portfolio consists of 7 doors, appraised at 800k with 300k in liabilities.
We assume the seller will have no marketability to sell the 25% share outside of the remaining members.
What percent would you degrade the value of the 25% share because it is a minority share?
Additional question, we calculated 11% deduction from the appraised value to account for realtor fees, and closing costs to simulate what the properties would actually be worth if they were sold. Does this seem accurate?
We’re attempting to be fair and valuing the business at the appraised values even though we assume the appraisals are higher than they should be.
Any advice appreciated.
Minority Share Sale
byu/Lanky-Divide7229 inrealestateinvesting
Posted by Lanky-Divide7229
1 Comment
Minority discounts typically run 20-30% for real estate LLCs since you have zero control and limited liquidity. Your 11% haircut for transaction costs seems light though – I’d bump that to 15-20% depending on your market since you’re also dealing with potential vacancy periods and property condition issues that appraisals don’t always catch