Hello there, I am a looking to connect with local and out of state developers who invest in the Los Angeles County area. I came across a general contractor/developer who currently has too much on his plate and is wanting to pass on some of his off-market development deals to other developers who invest in the area. These are all multi family set for new construction. I am not familiar with the development side of real estate investing as I am still in the residential side of REI. My question is: How would I bring value to this developer, while finding others interested in his projects and being compensated for referring them? Is there such thing as a "finder's fee" for off market development deals? How does one calculate a good deal for a new development project, is there a formula for this?
Thank you and I hope to receive some good feedback!
Developer · Boulder, CO · Member since 2018 · 530 posts · 365 votes
4y
@Kevin Q. Kevin finders fees have been around and in play for a long time.
They are also deemed to be commissions in many states and therefore held to be illegal unless the payee is duly licensed in that state.
Do your homework on this point, confirm your decision with a licensed real estate broker or attorney and button your agreement up in writing with your payor before spending too much time on trying to find a buyer.
Otherwise you may find yourself screwed if and when you have earned that finders fee.
Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
4y
You will bring value by finding him a buyer at his sell price.
1) Ask him what his sell price is
2) Do a market study to see what you think the property is worth to another developer
3) Market the deal to other developers for whatever price you came up with
4) Pocket the difference
It's totally fine and appropriate for you to make a finders fee in this situation. And there is no limit to what that fee can/should be. Just follow the steps above and pocket the difference. Whether you make $5,000 or $500,000 on this transaction is kind of irrelevant as long as everybody else's numbers are achieved.