OfflineI have come across a great opportunity with REOs buying in bulk. My realtor who knows that I'm looking to buy for 65% of FMV came across a bank that wants to sell in bulk for 45% of Broker price opinion.
I contacted an investor who I told him about this opportunity, was willing to buy in bulk at this price.I told him what the criteria was as far as what the bank wanted to see before showing the list.They want a proof of funds (verifiable)or a bank statement. He is willing to do this knowing that last week I had a list of REO's that I showed him and he wanted to buy 4 properties to start. An investor came in and bought the whole bulk package, $37m worth of properties for $17m.
Now he knows we have to act quick if he wants to buy this cheap. He's ready to go.
When I sat down with him originally, I told him about this opportunity and that I was looking for a partner to help me buy,50/50. I told him I was a carpenter and currently working as a Home Inspector and I could go in an assess the properties to see how much work they need and acually do the work or get a crew together to do it. We never really agreed on anything besides me finding the deals.
Do I stick with the 50/50 deal that was never really agreed upon or do I ask for a finders fee?
I know I have other skills to offer to compensate for having no money in the deal, but I want to do the right thing and not blow this great opportunity.
How should I handle this? This guy has alot of $$$ and wants to buy/hold/rehab.
Any input would be greatly appreciated.
Thanks,
Bob
Before you ask for more (and potentially look greedy), have a conversation on what you both feel is fair and why. Partnerships are hard..I was involved in a family business. SPELL IT OUT or it can can be detrimental.
How much do you stand to make? In the above scenario..for simplicty without considering anything else (rehab costs, taxes, if it would actually bring 37M, etc..) 37-17= 20/2= 10m for and you are expected to oversee it, he puts his money "at risk" for 10m. If you assigned it and added 10% to the 17m, you would be making 1.7 m (no more of your time expected)
What you need to figure out is in the first scenario what the extra costs are so you have a REAL idea what you are likely to get out of it and compare it to the amount of time you will be required to put into it. Simple cost/benefit analysis.
If you really don't think it is enough, then ask for a fee too. (Obviously, you don't want it to end up that you are more the less just compensated for your time as that's just a JOB!) Do you have ANY idea what kind of condition these properties are in and what your "duties" will be to earn your 50%?
Good Luck..will be watching to see what happens
"Whether you think you can or can't, you are probably right" Henry Ford
Thanks for the response, it made me re-think what to do in order not to mess this deal up.I'm still waiting on this investor to put together his bank statement or proof of funds letter in order for the current bank to release the REO list to us. They want to make sure they are dealing with serious buyers.
The investor I'm dealing with wants to buy multiple properties to rehab and hold.I just want to make money.Your right about not trying to be greedy. I want to make it a win-win situation for everybody.
I will sit down with him and let him know that I would like to assign 1 or 2 of the properties or maybe even help rehab them. I'll see what he thinks and maybe something good will take place if I let him decide what is fair.
Bob
There is such a fine line in business but my best advice is to always be Fair, Honest and open. But most importantly in partnerships is to define from the get go. I'll never forget the comical (but realistic) advice our attorney gave us when my sister, mother and I started a small business together "SPELL IT OUT, SPELL IT OUT, SPELL IT OUT. Last thing you want is to be giving eachother the bird at the family Christmas"..
"Whether you think you can or can't, you are probably right" Henry Ford
I was thinking about asking straight out if this investor would fund one deal for me since I will be the one finding him deals well below FMV. I 've heard where other investors ask if anyone wants to be their money partner and split 50/50.
You're right about spelling it out. We should have something drawn up so there is no confusion on what I will make for a finders fee or even a partnership. I still want to be fair and honest.
At this time I'm still waiting for the investor to put together his proof of funds letter so we can get the REO list from the bank.
Bob