Structuring our first private money deal

[Melissa Dunn]

I’d love some input on this. My husband and are new investors with a couple of properties, both of which were obtained with personal funds. We were recently contacted by a couple (also fairly new investors) who live on the other side of the country from us, but have a child in college in our primary market. They are hoping to find a property in our market that will make a great rental for their daughter and her friends while in college, and that they could continue to rent after she graduates. Because they don’t live here, they are wanting to partner with us, as feet on the ground to help find the property, and manage the rehab. We have not done any deals with private money as of yet and are just curious as to any thoughts about the best way to structure this deal, as we would not be using any of our own money but would also not be re-selling after the rehab because they would already own the property! Would you run the numbers the same and factor our ”fee” of 15-20% of ARV, or would it be better structured some other way? Thanks in advance for your input!!

[Matthew John]

@Melissa Dunn If I was in your position then I would just set a flat fee. It's kind of like a Wholesale deal. You're finding the property and they're paying for it, only difference is you aren't renting it out (I don't think), selling it, or living in it. 

You should get a fee (whatever you think is appropriate) for finding the property and doing the leg work and also managing the rehab. 

You can structure it however you want, but to me it would make sense to just do it like a Wholesale and take a 'finders' and 'rehab management' fee.