What is a fair ownership percentage for finding discounted deal?

Question

I have found an off market deal on a vacation rental. I have discussed the property with the current owner and he wants to sell quickly. Although I have not nailed down a sales price, I am very confident that, if he can sell the property immediately, he will sell for 550k or less, which would be about $100k under the market value.

I have also spoken to an investor who owns other vacation properties in the general area and knows the market. He indicated that he would be very interested in buying the property if we can get it at $550k or less. He also has funds available via a line of credit to purchase the property immediately.

After discussing the deal with the investor, we both agreed that we could either immediately list the property at around 675k and flip it for a nice profit or we could refinance the property, pull his cash back out, and hold it as a cash flowing rental. We both agreed that after we got the property under contract, and got some more specifics, we could decide on the best course.

I told the investor that  I want to own a percentage of the deal regardless, and he was fine with that setup. However, my question is, what is a fair percentage for me to ask for? I am bringing the deal to the table at a significant discount. However, I will not have any of my own cash tied up.

Larry Turowski · Answer

@Bruce Clark It comes down to what is a deal to the investor.  You're likely going to get a small percentage.  Without the investor you have nothing, unless you have other interested investors.  Without you, the investor will have other deals.

Remember, relationships are important.  If your investor is a legitimate buyer you want him to be happy with the deal he'll buy more.  And he'll want you to be happy so you'll bring him more.

So get it under contract.  Be honest with the seller.  Maybe even bring the investor to look at the house first so you know he solid with the deal.  After it is under contract ask the investor what would work for him.  If it really seems too low for you, tell him to give you a few days to see what your other investors will offer.