Finders Fee for Offmarket Multi-Family

[Jeff S.]

Hello BP Community,

I am working on ramping up my RE portfolio and someone through my network is working on getting me an off-market deal with their landlord. I am trying to better understand how to reward this person, as they are putting a lot of effort into getting the landlord to meet me with me. As I understand, finders fees are mostly illegal, how would you go about this? This person definitely deserves something and she is not a licensed real estate agent/broker. I want to do things right and I appreciate your valuable input. Thank you for your time!

[Will Barnard]

Originally posted by @Alexander Hish:

The person finding the property should put it under contract like a normal wholesaler with an assignment clause. They then transfer that contract to a third party, which would be you. 

This comment along with the one that follows it stating the same things is not good advice for most states and is irresponsible legal advice. Without the other party being licensed, this advice would be considered brokering without a license in many states and punishable by major fines and even jail.

So long as the finder who is a tenant in the building is not negotiating a purchase contract and only getting you in contact with the owner so that YOU may negotiate on your own behalf a contract, there is nothing illegal (to my knowledge - I’m not an attorney so check with yours in the state in which this would take place) by you paying for information. Essentially, that is all the tenant is providing, information to you. Pay them, 1099 them for anything $500 or more and happy hunting/negotiating.

Do run this by your attorney to be sure as I am not providing legal advice here.