Partnering with a Real Estate Agent

[Tyler Frost]

Assuming things don't crash and burn in the coming months I am planning on partnering with a real estate agent on a couple of flips and I am a licensed contractor and I am trying to structure our partnership fairly. Here is the situation. We will obtain financing together, he will be responsible for finding the deal, I will assess the property, he will handle comps and other agent duties. We will write out a scope of work together and agree upon a budget. Once we close I will be responsible for pulling permits and overseeing construction and my wife will handle the accounting a provide weekly reports and pictures to the real estate partner. After completion he will list, market and sell the property. Here is where I am getting snagged. The agent will obviously gain a commission from the sell and if the listing. What I am having a hard time structuring is if the agent is making money off the sell as an agent and the commission is coming out of the deal, I am trying to figure out how to fairly be compensated for being the contractor and overseeing the project. Profits will be 50/50 otherwise. Should I collect the same amount as he collects in commission before profits are split? I am not wanting to sound greedy because I understand the value of the agent partner, but I will also be committing as much time or more in the remodel phase as he will be in the selling phase. For reference, I will not be performing any labor myself, but rather oversee subs, pull permits, ensure material is ordered and delivered on time and things like that. Any suggestions on how this should be structured fairly for both of us?

[Mason Hickman]

@Tyler Frost

It's worth finding out if the agent needs to pay his broker for "personal deals." When I was an agent with United Real Estate, it was a small fixed fee for representing ourselves when selling our own personal deals. Therefore, there was no need to have a percentage of the sale price as a commission for the listing agent. I would take the broker's portion off the top and then split the profit of the deal equally. 

One other thing you should keep in mind: agent will also get a portion of the commission when you initially buy the property if you're finding the deal using the MLS. Make sure you factor that into the overall profitability of the deal so you get your half!