No skin in the game, yet wants 50% of profit

[Donna Carroll]

Today I had an "interesting deal" presented to me and I'd like to find out what other investors think if the same "deal" were presented to you.

The deal that was solicited has to do with purchasing pre-construction homes at various phases of build. Then turning around to sell at retail for a profit. Now, you the investor will finance this deal 100% and the "deal-maker" will find you the area and home builder to put you together with. The "deal-maker" has no skin in the game, yet after your initial investment has exceeded 50% profit, the "deal-maker" expects a fee of 50% of your remaining profits.

For example: Your initial investment = $5,000.00. Half of the initial investment is 100% yours = $2,500.00. Once your investment + profit of $7,500.00 has been realized, any profits after that would be split 50/50. Therefore, if your profits were to exceed, say $50,000.00 then the "deal-maker" would expect half of that = $25,000.00. 

(Mind you, there is virtually no down-side risk. IF the values decreased during the pre-construction phase, you simply would not purchase.)

I'm all about win/win deals where everyone can make money. And I get that 50% of something is better than 50% of nothing. However, in my game-book, 50% is a lot to ask for on the back end of a deal that I financed 100%. Especially when it doesn't take much time or effort to create the deal, it really just takes money. Please tell me your thoughts...

[Wayne Brooks]

Sounds like the OP is being approached to participate in something that was popular here up until the bubble burst, then disastrous.  The "investor" simply puts up a deposit on a purchase contract (at a "pre-construction price") in a new home development, with the house to be completed 6-12 mo.s out.  The goal is for the home prices to go up during that time, so the investor can resell the house, without ever closing on it, for a $30-50k profit.  It actually worked for a short while, but if you put your profits back into additional houses you got hung out to dry when the market stopped.  Usually the deposits were in the $20-40k range though.  These deposits are not refundable, so risk free isn't a good characterization.