QUOTE (lihipr @ Jul 31 2010, 10:08 PM) Although 50-50 split between the investor and the expert is the norm, I don`t agree with it.
I think that the expert can get his/her commission in few ways:
- When buying the property, if the expert is also a real estate agent, he/she should get his commission. from the seller and not the investor. If the expert is not a real estate agent, then the investor should pay the expert a commission of about 2% of the asset purchase price.
- Managing the property should be another profit the expert can make which should be about 4%-5% of the total rental revenue of the property.
- Assistance in organizing a mortgage should be another 1% of the mortgage amount.
The expert give his expertise at the beginning when purchasing the apartment, and then when managing it. He should be compensated directly to his added value.
I can understand not agreeing with the 50/50, but I can`t believe you have weighted the expert so minorly. First off, it`s not a commission - it`s what they bring to the deal. They bring time, energy, knowledge, contacts, systems, experience and a whole host of other things that Thomas has listed in various places in these forums. And they bring these things for the entire length of the deal, often including when the property is sold. All the other partner brings is money, and maybe getting the mortgage, and as we all know, money is a renewable resource whereas time is most definitely not.
Secondly, I can`t believe you believe that they`re worth less than the realtor on the buying aspect. They arguably have to do more work on that aspect than the realtor does, as they`re involved (at least in an overseeing capacity) in everything the realtor does as well as a whole host of other things.
Thirdly, property management companies make somewhere between 8 to 15% of the total rental income, depending on the place, the type of building, their responsibilities, etc. So, you apparently believe that the people who oversee the managers should make one half to one third of the PM companies, and get absolutely none of the equity buildup or mortgage paydown?
Really? The person/team that managed everything and coordinated everyone for years and years (conceivably 20 years or more) should get absolutely none of the equity in the property? That`s the part that floored my the most, actually. At no point did you say that their years of hard work should be recognized with a final payoff. So, apparently they should just be happy doing all this work for years for just a few thousand dollars.
Well, like pretty much everyone else on these boards, I believe in a strong win/win relationship. And seeing as how your idea of a win is miles from my idea of a win, I guess it`s pretty obvious that we won`t be doing any deals together!
Have a good one, all!
JohnS