Heres a question for the experienced ones i guess.
Ive been buying foreclosures in the NY/NJ area for the past couple of months. I’ve gotten into some very nice deals.
Basically, all the money has been put up by 1 investor who has absolutely nothing to do with the purchase, financing or selling of the property other than just wiring me the funds. He puts up the funds for a month or 2 until we refinance and then he receives the principle amount and the profit when the property is sold. (He will also be receiving a 10% preferred return (anually)for the duration that his money is out)
Now heres the question : Its time for me to negotiate a long term agreement of “profit spliting” with my investor. My question is , what would be the standard or norm for a person like myself to receive (what % of profit at time of sale) for facilitating the entire deal from beginning to end. Would 50% sound like too much ?
I’d like to hear what others have worked out with their investors.
Any input into this subject would be greatly appreciated !!
Does anybody have any experience in this area that could give me an i dea?
First of all, he needs you more than you need him. There’s plenty of money around so he’s not unique. You however, the deal finder and executor, are a hot commodity. He should be begging you for 18-25% and be happy about it. Where else is he going to make that kind of return? Nowhere.
He can take his money and invest in trust deeds with a hard money lender and earn 12% + 5 points a couple times a year so you need to make it worthwhile but giving 50% to someone you’re already working with seems excessive to me.
If you really really want to give him 50% then I’d suggest you not sign any long-term agreement and instead go look for cheaper money while you’re still doing deals with him.
If you want more information on deal splitting checkout Ward Hanigan’s site at foreclosure forum [dot] com. He has information on private investors and private lenders. Good luck!
Thanks a ton Kawika. Appreciate the input. I will deffiantely check out that forum.
Hey just wanted to know if you can perhaps send me the link to that discussion. Cant seem to find it.
thanks alot !
Does anybody else have any experience in this area that could possibly give so more insight as to what the norm is in regard to sharing profits.
Thanks guys ! !
Anybody else want to comment. I think this is a pretty relevant topic to all investors