How should I get paid as the agent and rehab manager?

Question

Hi All,

This is my first post and need your help please.

I'm a fairly new licensed agent and will be flipping properties with a friend. I will be finding the deal, managing the rehab, and listing it. The funding will be provided by him(all cash). He will not be in the state to help with anything.

How do you recommend I get compensated for finding the deal, managing rehab, and listing the property.

Thank you,

David

J Scott · Answer

Why not borrow the money from your friend and pay a fixed interest rate instead? This way his money is secured and his risk reduced, so he should be happy. And you will have full control over the deal and won't have to answer to an out-of-state equity partner, so you'll be better situated to be successful.

If you a dead-set on an equity partnership, why not 50/50? He gets half for providing all the money and you get half for doing all the work...

If you a dead-set on an equity partnership, why not 50/50?  He gets half for providing all the money and you get half for doing all the work...

Manolo D. · Answer

@David Lopez I always treat something like a jigsaw puzzle, pay to cesar what is due to cesar. the partnership you are into, needs to pay for your fees like you were a different real estate agent; if you were a general contractor, needs to pay for your GC fees; if you were a construction manager, get paid as a construction manager (rehab manager as you put it). remember not to put any "savings" on the numbers just to make it work, i.e. your target is 80% LTV, and you are at 82%, then you say to yourself, I will just discount the 2% from my RE commission. Pay everyone according to their qualifications and what they do. 50/50 is fair, if you read testimonials and etc from BP, most of them say that the money is the least of their worries, in my opinion, in SoCal/CA, it might not be true.

Thomas I. · Answer

I am in the same boat.  Working a deal with my brother and dad. Both are lawyers and have put in all the capital. Brother is actually a RE attorney. Handles all the paperwork, pretty convenient. I am in real estate full time. Investor/Agent.

I found the deal and will manage and list it.

Since I spent a good amount of time and money in marketing to find the deal, I wholesaled it to them to cover costs. (and a bit more. you know..for the effort).  I will manage and run it for 50% of profits.  I will then list at cost.

Everyone is happy with me getting 50%. Mostly after I told them I was offered hard/private money..

Good luck and shoot for 50/50.  It's not unrealistic.

David Lopez · Answer

@Omar Mendez I like the idea. I will consider it as well. Thank you.

David Lopez · Answer

Thank you all for the replies. You all make valid points.

Verna M. · Answer

Good work on talking to the guy and doing the deal!!  You shouldn't feel this way at all.  Have you seen the other thread where people are talking about throwing 25k in the stock market to chase short term returns? Never mind, it doesn't matter.

Money is cheap, cheaper then labor these days if you really think about it.  As Manolo said, if you have a deal the money is the least of your concern.  There's a lot of money out there chasing after less deals, dealing with contractors is HARD WORK.  In socal finding a deal is probably the hardest part of all.

Looking at your deal from the outside, with a 50/50 split. I'd much rather be the investor putting up the cash and then  be the person who is managing contractors and hustling to find a buyer.  (personally I would do both, or fixed rate as J Scott said)    Don't ever underestimate the value of your work!

David Lopez · Answer

Thank you all!

After speaking with him today he seems to be fine with 50/50 of profits. But, I still don't feel comfortable taking that much. It may see crazy, but that's just how I feel.

Wayne Brooks · Answer

50/50 is fair, and somewhat common.  Maybe you discount your commission out of that.  Some guys, who are providing the money of course, think it should be 80/20 or 70/30 them.....but not.

David Lopez · Answer

I'll run it by him regarding the fixed interest. I think he's set on actually doing flips vs rate of return.

50/50 split seems a bit high to me. I would love it, but it seems unfair. Maybe it's the inexperience on my end.  So, I would still take a commission for the sale and 50/50 of profits?

Another investor recommended I take no commission on the sale and split 70/30 of profits. I would receive the lower amount. As we establish this business relationship increase later on.

How should I get paid as the agent and rehab manager?

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