Paid in membership units instead of cash for a lodge renovation. Holding what?

The lien question is the one I'd resolve before the crew shows up, and it's a question for a construction attorney in your state, because mechanics lien deadlines and the effect of accepting something other than cash vary a lot by state. What I suspect is that the moment you agree to take units for the balance you've changed the character of what you're owed, and the notice deadlines run on their own clock regardless of what you and he agreed on a handshake.

Separately, I'd want to understand why he's offering this. A small mortgage and $610k of revenue should leave room to finance $164k of capital work. Either the revenue figure isn't what he says, or the mortgage isn't as small as he says, or he's tried a lender and been turned down. Any of those three is something you'd want to know before you're both an owner and the contractor.

Take the pieces separately, because you're being offered three transactions at once.

The pricing question first. Twelve percent of the entity for $124k of work does imply a $1.03M value for 100 percent of the equity, but only if the units are being issued at fair value and only if equity means what you think. Equity value is the property value minus the debt. If the lodge is worth $1.6M and carries a $600k mortgage, then $1M of equity is roughly consistent. If it's worth $1.1M with the same mortgage, you're paying $124k for 12 percent of $500k. Nothing in what he's told you lets you distinguish those cases, so the first document is the mortgage payoff statement and the second is an appraisal or at minimum a broker's opinion of value.

On revenue, hotels are valued off net operating income after a management allowance and an FF&E reserve, and small independents often show a bigger NOI than they can sustain because the owner's own labor isn't in the expense line. A $610k top line at 26 keys is plausible against your ADR and occupancy figures, and it says nothing about what falls to the bottom. Ask for the profit and loss by month, because seasonality determines whether the winter deficit eats the summer.

On control, distributions in an LLC are generally made when the manager or members holding the required percentage decide to make them, per the operating agreement. A 12 percent holder usually decides nothing.

Whether taking units instead of payment affects your lien rights, and how the units are treated for tax, are questions for a licensed attorney and a CPA in your state, and both should be answered before your crew starts.

One physical thing that gets missed on small seasonal lodges. Find out what the septic system is permitted for and when it was last inspected, and whether the well or water supply is a public system under state rules because of the guest count. A 26-key lodge on a private system can be sitting one health department visit away from a five- or six-figure surprise, and that cost lands on the entity you'd own 12 percent of, right after you've spent your $124k on bathrooms that drain into it. Zoning matters too, since a lot of these places are legal nonconforming uses, which limits what can be rebuilt after a fire or expanded later. County planning office will tell you, usually for free.

The offer itself is the disclosure. He's converting a $124k payable into equity because he doesn't have $124k, which means the operating account is thin. In a seasonal business, thin in the spring is how you end up borrowing at bad terms in the fall.

Something that keeps surprising me across the handful of buildings I own is how much a seasonal property needs in reserve just to stay closed. February at a lodge like that still costs you insurance, property tax, minimum utilities to keep pipes from freezing, and probably a caretaker. Call it $6k to $9k a month with nothing coming in. Five slow months at that rate is $40k the summer has to cover before anyone talks about profit. @solder, ask for the bank statements rather than the P&L for the winter months, because statements show you the low balance and a P&L doesn't. If the low balance was under $10k last March, the entity's real problem isn't your invoice.

Take the cash, do the work, get paid, and go home. You're being offered an illiquid minority position with no control, no visible financials, and a seller whose cash position is questionable enough that he'd rather give away a chunk of ownership than pay a contractor. If the lodge is genuinely a good asset, it'll still be there in three years and you can buy in with money instead of by writing off a receivable. If he can't pay $124k, negotiate the scope down to what he can pay, or stage the work across two seasons with payment on each stage.

@verity, agreed on the caution, though I'd not close the door completely. There's a version where @solder takes cash for this job, keeps working there for two or three seasons, watches how the place actually runs and how the owner actually pays, and then buys in on terms he's set himself with real numbers in front of him. Working on a property is the best due diligence there is, and he's about to get paid to do it.

Do the arithmetic he gave you and see whether it even holds. 26 keys times 365 is 9,490 room nights. At 55 percent that's 5,220 nights, times $118 is about $616k, so his $610k is internally consistent. That only tells you he can multiply. It doesn't tell you the $118 is real, because a lot of small lodge owners quote their July rate and call it ADR, and it doesn't tell you the 55 percent is real either.

The check that costs you nothing: get his state and local lodging tax returns for the last three years, plus the last three years of entity tax returns, and compare the gross receipts on those filings to the $610k. Lodging tax filings are hard to inflate because they were sent to a taxing authority. Then get the winter bank statements @thicket described. If the filings say $470k, you've learned everything you needed for the price of one email.

On the offer itself, the part I'd hold onto is that he's paying you in units because he can't pay you in cash. That same shortage will exist next spring when the parking lot needs sealing and the water heater goes, and as a 12 percent holder you'll have no vote on how it gets funded and probably a dilution clause waiting. So take the cash, stage the work if the cash isn't all there at once, and have a construction attorney in your state confirm your lien deadlines before anyone gets on the roof. Then look at buying in later with numbers you've verified yourself.