Investors finder

[arnoneshel]

Hello,

Yesterday I had an important meeting with a person who has an investor who might be interested in investing in real estate with us.

The person is interested in collaborating with us so he finds the investors and we find the property.

If the investor is not interested in JV but willing to pay an assignment fee, we agreed that we split the assignment fee 50%/50%.

If the investor is interested in JV - then the person still finds the investor but then we do all the work from the time of closing (managing, handle exit strategy).

So if the investor gets 50%, the person suggested that of the remaining 50% to us he should get 50%, meaning the split will be 50% to investor, 25% to him and 25% to me.

I think 25% of the pie for him is too much since we are doing every else.

I know everything is negotiable, but what is common % in the real estate industry for an investors finder?

We both intend to collaborate on an ongoing basis and look for a resonable and win/win profit sharing.

I appreciate the help.

Arnon

(647) 219-1595

[email protected]

 

[mikecunning]

QUOTE (arnoneshel @ Dec 13 2007, 04:23 AM)
Hello,



Yesterday I had an important meeting with a person who has an investor who might be interested in investing in real estate with us.



The person is interested in collaborating with us so he finds the investors and we find the property.



If the investor is not interested in JV but willing to pay an assignment fee, we agreed that we split the assignment fee 50%/50%.



If the investor is interested in JV - then the person still finds the investor but then we do all the work from the time of closing (managing, handle exit strategy).



So if the investor gets 50%, the person suggested that of the remaining 50% to us he should get 50%, meaning the split will be 50% to investor, 25% to him and 25% to me.



I think 25% of the pie for him is too much since we are doing every else.



I know everything is negotiable, but what is common % in the real estate industry for an investors finder?



We both intend to collaborate on an ongoing basis and look for a resonable and win/win profit sharing.



I appreciate the help.



Arnon



(647) 219-1595



[email protected]






Try running a search under 'referral / finder fees'...there are a couple of threads on this. Basically, it is whatever you negotiate.

 

[TorontoRealtor]

QUOTE (mikecunning @ Dec 13 2007, 10:22 AM)
Try running a search under 'referral / finder fees'...there are a couple of threads on this. Basically, it is whatever you negotiate.






Also look up finder's fees or "bird dog fees" in REEBA 2002 (Real Estate and Business Brokers Act). You may find that your realtor has a different take on the subject if you are using someone with access to the hot listings.

 

[Thomas Beyer]

..So if the investor gets 50%, the person suggested that of the remaining 50% to us he should get 50%, meaning the split will be 50% to investor, 25% to him and 25% to me.

I think 25% of the pie for him is too much since we are doing every else.

I know everything is negotiable, ..



A common fee in limited partnerships / RE syndications is a 6-12% sales commission upfront for the guy who brings in the investor. 10% is quite common. Offer him that. No risk to him/her. Easy money .. early. Nothing on the backend though.

So, yes, I think 25% of the toal or 50% of yours is too much.

Example:
$200,000 investor for $600,000 property
He brings in investor and gets 10% or $20,000.
Net $180,000 minus some holdng costs / cash-flow reserve / upgrades .. say $30,000. Net $150,000 plus $450,000 mortgage for $600,000 property. Assume for now no cash-flow. Sells in 3-4 years for $800,000. Profit: $200,000. You make $100,000. Investor makes $100,000 (or 50%). Finder makes $20,000 - early on with no risk.

Same example now, with no 10% fee, just 25% at the end. Investor needs to invest only $180,000.

Same $30,000 in costs/rserve/upgardes. Same $450,000 mortage. Same $200,000 profit in 3-4 years.

Investor makes $100,000. You make $50,000. Finder makes $50,000. Fair ? Your call !

How about: Investor makes $90,000 (45% of profit or 50% ROI on his investment), you make $90,000 (45%) .. finder makes $20,000 (10%) .. fair ?

or how about: Investor makes $80,000 (40% of total profit or 44.44% on his money), you make $80,000 (40% of total profit) .. finder makes $40,000 (20% of total profit) .. fairer ?

In life you don`t get what you deserve, you get what you negotiate.

 

[DanBarton]

Arnon,

I do strongly agree with Thomas on this, and I must admit that I have experience with this exact situation. Both my second and third deal were both put together the way you mention above. A realtor was sending me cash, and closing the JV`s for a 25% ownership position in the property which I was okay with since these were my first deals, I was just getting started and desperately needed some credibility to show other potential JV`s. So I did it. 25% - 25% - 50% split.

Later on in the game after I did a few more deals, had a bit more credibility and confidence so I set up a meeting to negotiate the percentage that he was receiving to a lower amount, after many more meetings, he`s now down to a 2.5% ownership for JV`s he sends our way and happy with it. Especially considering the first couple of properties were in Calgary in 2005 which have now been sold, and I must say cutting a Giant check for his referral was hard but I was still grateful for his help in getting me started.

I usually coach real estate investors that there are 3 components to any real estate deal:

1. Down payment or investment
2. Mortgage or Leverage
3. Property or Asset

As soon as you have all these pieces working together, you have your next deal but you do need all of them. Each piece of the puzzle someone brings to the table, should be compensated for. A possible solution could be for your referral to qualify for financing and your JV puts up the cash, split it 33% - 33% 33%.

Think out of the box, but remember 25% of something is better than 100% of nothing or in this case 50% of nothing.