Couldn't agree more.  Slow day eh?

Why would anyone want to invest in Vic?? State govt is pushing austerity measures to shore up a shrinking revenue base and property is sinking like a stone.

Keep your money in your pocket. This is not the time to buy. Watch and wait. 

You can't devalue to zero. In a hyperinflationary scenario the currency would simply depreciate against other currencies. Zimbabwe for example. Their solution was to adopt the US dollar as currency – something they couldn't print or manipulate.

Assets and commodities are valued in a number of ways. A currency collapse or high inflation doesn't improve their value in external currency terms. PM's may rise in US dollar terms but remain the same in AU dollar terms if the US currency is falling.

Those with US properties are likely to loose most if not all of their investment in coming years. It's a speculators market not an investment market.

Yes vacancy rates are dropping and rents do have some upside albeit limited. The downside will be pressure on asset values as CG goes negative for many while costs rise. The next stage may well be inflationary and job security pressures on tenants. I expect to see PM become more of a challenge and a rise in delinquency rates over the next few years. I also expect to see only a small percentage of PI's manage a lift in their net bottom line over the next few years. The majority will fail to evaluate their investments realistically or critically and make the necessary adjustments. 

Second half of 2013 I expect to see WA get a serious wakeup call as the construction wind down enters its final stages.

Prediction for 2013/14. FMG struggles as ore price drops below $90 and a production glut hurts production volumes further limiting GTO. FMG becomes a takeover target. 

$750k in capital invested and you’re loosing at least $7500+/yr.

I can only suggest you don’t go into business with numbers like those.

The deal side should be fair and equitable. Advantage to anyone side is something to be avoided because an unbalanced deal has a higher probability of ending acrimoniously. So when you run into what you think is inequality make this statement and indicate your objective is to see everyone get what they want. A happy deal tends to be a long successful deal.

A good start. It seems they're taking you more seriously. Something you always need to keep in mind is the more competent you appear in a negotiation the more likely you are to get concessions. You always need to negotiate from a position of confidence and knowledge. If you can't think of an answer during a negotiation you always just say, "I'll give this more consideration before giving a firm answer".

In a negotiation have a list of bullet points you want to discuss or get clarification on. Note down responses. These can be referred to in future talks. 

Note new subjects for future research/consultation.

By coming prepared, writing things down, making recommendations etc you start to build a platform of confidence, project an image of competence and someone to be taken seriously. You also show you are giving the offer a serious hearing and think it may have merit. That gives them the incentive to work harder at structuring a professional deal and according you a greater level of business respect.

If you eventually agree to a deal your future relationship will be much more professional and equal. That will have a bearing on how the business is managed as a multi owner operation. 

A token business plan is not something you can base a deal on. Professionals do not put money into something airy fairy. Where you see gaps they have to be completely filled in. This kind of thing goes to their own business ability as well. You can get away with poor business planning when you are the sole owner but absolutely not in multi party deals. Everyone must understand the business, its goals and objectives and how its going to get their.

You should negotiate even if it's only for the experience. At the very least this exercise will leave you a much smarter cookie. Regardless of how things go try and take it to its natural conclusion and in a way everyone can walk away relatively happy regardless of whether you buy in or not. You can also leave the door open for a future deal if you don't commit completely or at all this time.

PS.

If the guy can bring business to the table he can be accommodated with options, bonuses, profit share increase etc as a kicker. Just don't don't give equity away. That gives a huge chunk of not only future equity value away but also your share of future dividends as well. You also loose voting power which make you virtually powerless.

Over 5 years that could run into millions if this has as much potential as you say.

Anybody came to me with a deal like that I think I'd die laughing. 

1. Neither of your proposed partners brings anything to the table (other than money) that has any equity value so your share holdings are based on dollar denominated share values. Their $1 does not buy any more equity than your $1. Your $240k = 40% simple.

2. Self appointed roles must first all be fundable. They can call themselves whatever they want but salaries have to reflect the limited capital a startup has. No one gets $200k/pa salaries for starters. In start ups like this you might be lucky to get $30k/pa if anything initially. Startup partners usually always get the same money and contribute the same amount of effort.

3. If you are not going to work in the business then what they are asking of you could be construed as seed capital. Now it's a whole new ball of wax. They have to suggest a value and offer you a percentage. You can structure this any which way that suits you. You could demand security or none at all. That implies that a secured arrangement provides for less equity than a higher risk unsecured arrangement. 

Under a seed capital arrangement I would want at least 49% for my $240k and with conditions.

1. The business must use up the owners capital first.

2. Before the first payment (no more than $30k) they must have achieved specified milestones.

3. Subsequent payments must show that the business has tangible equity developing within the business (stock, goodwill etc)

4. Debt to equity ratios must be agreed upon (overdrafts, lines of credit, creditor and debtor levels etc)

5. You must have 2 votes on the board of directors and a 3rd director must be an objective party with no financial interest leaving their 2 votes. 

6. Accounts must be audited every 6 months by an independent accounting firm. 

7. Business reports must be provided monthly.

8. Any significant event of interest must be notified with 24 hrs (accidents, legal complaints, substantial hold ups etc etc)

9. Veto rights on salaries although this could be a board function for senior personnel.

10. Spending over certain amounts must have board approval (plant and equipment). Budgets and expenditure must be pre approved by the board.

11. Deviation from business plan must be board approved.

You get the idea on the kinds of conditions you need to apply in order to protect your investment.

The command and control side can seem quite onerous so that needs to be balanced with arrangements that reward success in a growing business relative to your seed capital contribution. To encourage the stakeholders a substantial part of your exit strategy should involve selling back equity on a reasonable margin to risk reward basis. So you could offer 10% back at cost plus 15% after 12 months say. 

The reason for this approach is that if things struggle you want ample reward (49%) for the up front risk. If they hit their objectives like they claim then much of the risk has been eliminated so you reward that with a return to them of equity at cost plus a modest return. You do with a sliding scale all the way down to zero equity of you like. Up to you.

See my other post further down as well.

If anyone I did business with balked at this kind of offer I'd simply so that's OK I'm out.