Active Manager - how to get paid?

[Christopher Wraback]

I am looking at buying a rental property in New Jersey. I have found it, done the analysis, and determined that it is a sound investment property and ready to purchase. I have a funding partner who is putting all of the money up. It is a single family home so we are getting a mortgage and only need $50k up front. The funding partner is taking care of that and the operating income will pay the mortgage. With the funding partner putting up money for the entire investment, how should I, the active manager that performed the analysis and found the property, get paid? Do I go 50/50, maybe lower, charge a transaction fee, or charge a commission? I am hiring a property manager as well so it's not like I am extremely active either, I just found the property and am taking care of the whole buying process and overseeing the property manager.

[Nathan Gesner]

I think a 90/10 would be acceptable. So would a 10/90.

You need to know what you are worth and the value you bring to the deal. I would expect direct compensation for the work. For example, you find the deal, put it together, handle it all the way through closing, and then manage it. Your direct compensation would cover the effort to bring the deal together and then a management fee for the on-going work.

Then you just determine how to split the profit. 50/50 may seem unreasonable if they front all the money and carry all the risk of loss and you're already being compensated for your work.