Referral Fees

[Marc Wilt]

I have a colleague that is very well known in my area and has multiple contacts. He introduced me to a luxury homebuilder that he has known for 25 years and is very well known in the area. I would have never met this guy on my own but my colleague was able to set up a meeting to see if the builder would be interested in taking me on a as a mentor. He owns many commercial buildings so this would be a small project for him.

We are looking at a piece of land and him building the house and handling all the marketing and everything else. I would only be providing the money. In the end we would be in after land and everything for 1.2 million and on the low end of the comps over the past 6 months the house would sell from 1.9-2.3 million so a nice little profit. I would be putting down 30% and getting financed for the rest and the goal would be to sell the house within 6-12 months. I will be doing more extensive research but the BOTTOMLINE question I have is what % of a referral fee is normal. I am very appreciative of him and this could be a long lasting relationship. My first thoughts were 10% of the net profit but does anyone have any suggestions?