Attn Commercial Brokers: Rolling Commissions?

[Anthony Palmiotto]

I recently had the pleasure of speaking with a best selling real estate author. I never thought I would have a chance to speak with that person but after calling their office they agreed to have a 15 minute call with me...the cool story of getting to pick the brain of a best selling author and multi millionaire real estate entrepreneur is a story for a different day though...

Among the things I asked that person was what is the best way to transition from just being a broker on large multifamily deals to actually buying multifamily units. One part of his answer included "rolling commissions" into your deals. I assume it would work like this:

A multifamily property is going to be sold for $5,000,000. A 2% commission would be $100,000 on this deal. Let's assume I split that $100k evenly with my company. I could instead ask the buyer to cut me in on the deal and give me a $50,000 equity stake in the property. In return, the seller will lower the price to $4,950,000 because he now does not have to pay me a commission, only pay my company's share of the commission.

I think that is the basic idea of how that works. Does anyone have any experience with this? Is that how it works? What is the upside and downside of doing this?

I assume a downside would be that you would just be a limited partner and would not have much say in decisions. Anything else?

Thanks in advance for your help!