NDA documents when looking for partners on a deal

[Laura Casner]

Looking for advice on NDA's.  I have a deal and business plan that I need to source capital for. I need a large downpayment to close.  I'm concerned about a scenario where I show the property to a potential investor then that person with the cash to close circumnavigates me and approaches the seller with their own offer, swopping in and grabbing the property on their own.  Anyone have advice here? Does it make me look bad?  Does it turn off people from funding my deal?  Is it common?  Anyone have links to templates for something like this or a sample they would share?

[Arn Cenedella]

@Laura Casner

If I may provide a different perspective………

I don’t go into a partnership with people I don’t already know.

It’s a recipe for disaster, an accident waiting to happen.

If you don’t already know the partner, how do you know his or her values, character, and integrity? if someone would “go around you” to take the deal, trust me, you don’t want them as a partner.

Partnerships can be difficult and need to be formed slowly and carefully.

I’d say find the partner before finding the property.

If you can’t trust your potential partner, it doesn’t really matter what any legal document says. In 46 years years in the industry, I’ve learned if one needs to get an attorney to enforce a document, everybody has already lost.

Say you get an NDA signed, and then your potential partner likes the deal, then you must form a formal partnership or ownership agreement - both you and the cash investor partner - would need to agree to the terms. Do you believe the cash partner will let you have control of the deal? I don’t. What then happens if you can’t agree on the terms of the partnership?    Do you negotiate the terms of the partnership before the NDA?

Even with an NDA signed by Sally, what’s to stop Sally from telling Jennifer about the deal? Jennifer buys it, then what’s your recourse? Are you going to retain an attorney and spend $50,000 $100,000 trying to prove your case? It appears you can’t bring the deal down by yourself, so it seems to me there is some risk to you no matter how you proceed. My response would be, if you can’t bring down the deal yourself, what’s to lose?

I can tell you as an investor with over 1000 units, I have NEVER gone around someone who brought me the deal. I’m not Mother Theresa but rather I understand it would not be in my long term interest to do so as I want that other person to bring me other deals in the future.

Your profile indicates “new to real estate” which is fine. We all started as newbies at one point. I’d say don’t be fearful, try to find a partner for the deal, but really pay attention to the vibes - is this someone you can work with long term? And hey if someone goes around you, it’s a learning experience and you move on wiser for the experience - not the end of the world, there will be other deals.

I just don’t think an NDA will offer you much protection against a more experienced more wealthy investor.

If the deal is really good, you could just wholesale it and make yourself $50,000 to $100,000 to provide capital for the next deal.

Good luck,

Arn