Compensation for Putting a Deal Together

[Bryan Escudero]

BP Forum Team!

I am currently working on a deal that will include 10 SFH for roughly $1MM with a small group of investors. The homes range in value from $75k-$175k. I can bring in others if there are rehab costs involved...there are many ways to split this up, but I have been thinking about having a master contract that would govern the deal. The best interest rates for the investors would be found in them purchasing the properties as SFH. We would need to figure out the equitable distribtion of the Cashflow and Equity.

What I am bringing to the table is:

Finding the deal.

Negotiating the final price

Guiding through due diligence

Mananaging (managing the project manager)

Working with the parties to setup the purchase, including lenders real estate agent etc.

I am not a Real Estate agent, Broker nor do I have any professional licenses to my name. I have put in a good amount of time an effort to gain a base of knowledge in Real Estate and building systems. I am closing on my first deal in a couple of weeks and should push to close on my second at the end of May.

What is a range that I should be looking for in the ways of compensation? What is a market rate for this type of service. I am open finders fee, equity, a portion of cashflow etc. I want to respect this group of investors. I am not looking to make a ton of money on this. I have been able to learn a ton on this project-assuming we can close the deal. Part of that learning curve is the compensation structure that I should be considering in this deal. 

I appreciate any guidance on this topic. I look forward to hearing from those who have gone before me. Thank you!

[Marcus Auerbach]

Fair compensation is a function of the value you contribute; if the deal would not have come together without you a percentage of the packe is appropriate. A good default is 3%, but it could be anywhere between 2% and 5%. Keep in mind that the investors will make a multiple of that thanks to you. You should be paid at closing.

Make sure you comply with State law, a title company or closing attorney (depending on which State you are) is probably a good starting point to investigate. I believe the license requirement only comes in when you keep repeating this type of work..

After the package has closed and you continue to contribute you should be compensated differently, either like a GC with a percentage marktup on the work done or like a PM. I would still shy away from hourly, because the tracking is debatable and also you should be compensated for results and not time.