Newbie: should we sign a legal contract for mentoring/ partnering???

General Real Estate Investing
1

Hello!

I’m a newbie here- actually writing on behalf of my husband who’s been studying REI materials for 2 years now and still has never come close to getting an investment deal done. But, he’s been approached by this guy who has his own real estate investing llc and this guy has offered to mentor and teach my husband how to do the investing as long as my husband signs two legal contracts that state in pretty sophisticated language that my husband is required to make certain deadlines of performing certain tasks (like networking with agents, finding property hotspots, etc.), also committing to spending a certain amount of my husband’s own money for marketing efforts each month, that my husband not engage in any other real estate deals on the side without the partner knowing about it, etc. etc. And if my husband was to not meet any of these agreements, then their contract would be terminated. Also, it states that my husband won’t be able to make any profit from the sale of properties until he nets them at least $125K and then my husband would be entitled to keeping half the net profits…

Is this normal? I think my husband (and I!) are just frustrated that it’s taken him over 2 years of studying, attending seminars, etc. and still no deals and so he’s feeling a bit desperate and wonders if partnering with this guy may be the only way to get his business going.

Should he sign these legal documents? Does it sound like my husband’s potentially going to be taken advantage of? This guy seems very savvy and confident, and used emotional, motivational language in the “accountability” section of one of the contracts, too. Reminded me of what a cult leader might sound like. :smiley: Am I just being paranoid, or should I be concerned?

Would love to hear any feedback you may have- thanks!!! :slight_smile:

2

This is ridiculous.

Your husband can keep half the profits after he’s produced $125,000 in profits? Really, now!

Doesn’t that seem fairly obvious that this is a bad move? Do you really need feedback here? Just asking.

The interesting …and odd thing here, as if the $125,000 profit hurdle isn’t odd enough, is that the mentor isn’t asking for any money up front. And by gawd he’s got an llc…!

Instead the mentor just wants all the profits off of whatever your husband finds, up to $125,000. I can’t breath that’s so hilarious.

Basically your husband is hiring himself out as a professional bird dog that has to net the mentor $125,000 in profits, before he can personally share in the wealth. Man, that training only costs $125,000…?!

I’ve got a way better idea. Just pay me $5,000 and I’ll let you keep all the profits from day one. And I won’t force your husband to spend money on marketing or any of that crap. Just send me the money, and he’ll be on his way to riches. Such a deal! No, really! :anon

I hope I don’t sound mean. :shocked

I realize you said you were a newbie, and you might not know what to look for in getting professional guidance. However, wild things like this just fly in the face of common sense.

Your husband already has all he needs to get started. He just hasn’t made up his mind that ‘something’ is going to happen, or else. Why that hasn’t happened is anyone’s guess.

However, I bet you know why.

3

i agree that with javipa, that deal is ridiculous. your husband spends his own money to make this other guy $125k, and just so he can get to keep half of what ever he makes above that? That sounds like a complete ripoff. Make sure there isn’t a hidden clause in there for your first born child.

Sometimes, starting something new can seem like such a huge daunting task, that you are too intimidated to even take the first step. But even the biggest task can be done if you break it down into smaller chunks and take it day by day.

First, set a goal. If your goal is to do your first deal, first understand what that means. Does it mean close on selling your first fix and flip? Closing on your first wholesale deal? Buying your first rental? Whatever it is, pick one and make that your goal.

Next, figure out all the steps you need to do to achieve that goal. Write the steps out in order, and the resources (contracts, real estate agent, etc) that you will need to complete that step. Set a time limit for completing this phase. It should take you no more than 3 days to complete this planning and get everything on paper.

Once you have all the steps written down, put deadlines next each one. Make the deadlines realistic, meaning not too little time but not too much either. As for accountability, maybe you can give your least liked relative $1000 to hold, and for every deadline missed they get to keep $100 of it, of whatever negative consequence that will get your husband motivated.

Last, execute your plan. Begin with step 1, and just do it. Focus on completing each step in turn, work through issues as they arise, find other successful investors doing what you are doing to network with and who can be supportive to you. And just work work through each step until you reach your goal.

No contract needed, and you get to keep 100% of your profits, and your firstborn child.

4

Sorry, I misread the contract about the $125K part. My husband says he can keep half the profits from any deals from the beginning, no need to meet $125K in profits first. The contract says that once he brings in $125K in net profits, then the mentor will begin teaching him how to do commercial real estate investing, too. Guess I read that wrong the first few times I read through. :frowning:

So, without the requirement of meeting $125K before he can get half the profits (as I previously stated incorrectly in my original post), does it still sound fishy for my husband to sign a contract like this? Thanks!!

5

Well…

OK, the $125k thing was the boogie man…

However, the commercial part is iffy, too.

All of the sudden when you’ve made $125k, you’re ‘ready’ for commercial?

I was ready for commercial after about 20 minutes investing in single family houses; after I realized how much work it was to create cash flow from a dozen junker houses. If I had made $125,000 in profits on junker deals, I would never have had the incentive to move up the food chain. Just saying.

Honestly, if you need this level of hand-holding; giving up half your profits; being locked into an arrangement with some person for effectively the first (at least) $125k in profits; I would think there’s something else going on here than just needing a mentor.

If you need somebody to keep you on the straight and narrow, follow Kelle’s advice. It’s cheaper and more effective than signing up with the “$125k Man.”

I especially like the idea of giving your relative 1000 bucks, and then letting him keep $100 of it, every time you miss a deadline. If that won’t work, make it 5000 bucks. Somewhere along the line, it’s got to begin to create enough motivation, if not pain to keep going.
:beer

6

Run, don’t walk, run away from this scam artist! :bs And be sure to hold onto your wallet as you’re doing so!

7

Agreed, and this is harsh but tell your husband to get a deal done. You can only research so much.

Experience > Research

8

… This is just the first red flag in a long post of them. Are you posting for your own piece of mind? Are you posting for him because he’s unsure? The trust/support system could be lacking.

But, he's been approached by this guy who has his own real estate investing llc and this guy has offered to mentor and teach my husband how to do the investing as long as my husband signs two legal contracts that state in pretty sophisticated language that my husband is required to make certain deadlines of performing certain tasks (like networking with agents, finding property hotspots, etc.), also committing to spending a certain amount of my husband's own money for marketing efforts each month, that my husband not engage in any other real estate deals on the side without the partner knowing about it, etc. etc. And if my husband was to not meet any of these agreements, then their contract would be terminated. Also, it states that my husband won't be able to make any profit from the sale of properties until he nets them at least $125K and then my husband would be entitled to keeping half the net profits...

We already know the $125k is bogus. Everyone has jumped up and down screaming runaway from this. But, how about a couple of extra questions:

1 - How did your husband meet this investor?
2 - Has Your husband and the investor sat down and talked for awhile?
3 - What’s the investors success rate/strategy?
4 - Why are you hesitant to sign the contract?

Is this normal? I think my husband (and I!) are just frustrated that it's taken him over 2 years of studying, attending seminars, etc. and still no deals and so he's feeling a bit desperate and wonders if partnering with this guy may be the only way to get his business going.

If, dealing with this investor is the only way to get his business going, your husband is not ready for REI. It’s that simple. The items you have outlined on the contract seem to be carrot/stick methods to develop motivation and scheduling. So back to the questions I posted about the investor.

If your husband has known this guy for awhile, maybe he’s ferreted out why your husband has done a deal yet. And developed the contract to hold your husband accountable to a timeline/schedule/motivation because it became evident that your husband doesnt have personal accountability.

Should he sign these legal documents? Does it sound like my husband's potentially going to be taken advantage of? This guy seems very savvy and confident, and used emotional, motivational language in the "accountability" section of one of the contracts, too. Reminded me of what a cult leader might sound like. :D Am I just being paranoid, or should I be concerned?

Wait, this guy used emotional/motivational language in a contract to get your husband off his butt to get a deal done? Sounds like this guy is a coach. A mentor should also be using this type of language to inspire their mentee.

Now with all that said, what this ‘contract’ should be, is an eye-opener to you and your husband. I know I was the same way almost three years with no deals, and then I found a partner who simply provides motivation. Nightly phone calls, daily emails, questions, timelines. We put our 2nd 4plex under contract yesterday! He’s got to get his motivation from an outside source.

9

This is Totally a scam in my eyes… Just so you know I bet the Mentor needs your husbands profits so that he can buy the books and education on how to do Commercial deals… Can’t teach someone else until you learn yourself. This is really not that hard of an industry. If you know the basics play the game… THAT SIMPLE. What it sounds like your husband needs is a swift kick in the right direction to get him going. Once the first deal is done the others come like wildfire if you do this correctly.