All Forum Posts by: Benjamin Zwiebel

Thanks Carlin. I think your right about finding bigger deals. But there is definitely an upper limit on that. 

Ilan, would you also say 2.5% is standard?

Thanks Joe. Are you doing big deals at 2.5%?

Hello all. I need a little insight. So, I am about to enter into a deal with a new partner for a percentage of equity in the properties in exchange for finding the deals. He has exhausted the on market deals for our area and doesn't have time to look for off market deals. My part is that I drive for dollars, contact the owners, set up the meetings, the showings and do the negotiations. His part is he puts up 100% of the money and once the closing happens the property becomes his responsibility. 

For my work I get a percentage of ownership in the properties that I find. My question is this: based on what I described, what would be a fair percentage to ask for?

I cannot find a standard for this type of work and I don't want to open yo high and be offensive or open to low and lose myself money. What do you all think would be a fair % to ask for? 

Thank you in advance to the community for your insight and advice

To everyone I have individually replied to, 

Thank you very much for taking the time to give me your feed back. I have read every response and found each one valuable and insightful. I am very grateful to be part of this community.

To clarify, I am in no danger of chasing their asking price. I know what price will work for me and what price will not. So my question was really more of "at one point do you not even bother making an offer at all?" but it seems that the general consensus is that you should always offer and let them say no. 

As pointed out by several of you, I do live in a small town and can develop a bad reputation, however, I only need 1 good deal here and then I can jump to other markets. I am not certain that I have ever seen a good deal appear in this market. There are no small property investors here. The only people in the market are people who are looking for single family homes and they tend to be emotional buyers. I think I will expand my search to the larger city 45 minutes north of me. I will buy my self a commute, but also hopefully a deal.  

 Yes. This is a good point Brian. I am more interested in "house hacking" it so that is why I am using thinner margins. The other reason is that in boom times it could easily cashflow $500 or $600 per month. But really that only reason I am seriously considering it is because it is the only multifamily property to be for sale in my community in the past 3 years. So waiting 3 years just to run the numbers on another deal is hard to imagine. But your right, if the numbers don't work, they don't work. I would have to offer them nearly 66% of their asking price before this worked.  

 This is exactly my problem Rich. I think you hit the nail right on the head. The market is so small that I am not sure that there is even opportunity to be made here. I have looked at several single family houses with the idea to convert them to mulifamily but the asking price is always very high. On average a single family residence here goes for between $175,000 and $225,000. That makes it difficult to find a way to convert it into a unit that will cashflow. As far as distressed properties go, people don't seem to care and won't reduce the price. Yesterday I looked at the triplex i mentioned in the original post. Its listed for $165,000 and in my estimation needs no less than $50,000 worth of work today and will be a maintenance hog for years to come. It is in terrible shape. However, the seller is not interested in negotiating a price as if they just don't care if it sells. That is the way the entire town feels about their properties. 

Here the only industry is oil and gas, so when oil prices are high there are no rentals and when oil prices are low there are not tenants. I am sure you must have some familiarity with oil and gas as it is big in Texas too. As for "why here?" its because here is where I live, so here is where I can use an FHA loan. I would love to go to another market but I don't have the $40k required to put 25% down.

 Thanks Cassi. I am certainly not trying to low ball just to low ball. All of my math is done based on getting a $50 per door positive cash flow per month and an 8% cash on cash return. Both of which I feel are fairly modest metrics. But the cost of property is high and the cost for rent is low. That is why the huge discrepancy between their asking price and my offer price.  

 Hey Russell. Can you tell me a little more about what you mean about "learning the value of the property"? The way I have been determining the value of a the property, to me, is that I have been using the a slightly less draconian version of the metrics that Brandon Turner puts out for multifamily properties (which is all i am looking for here.) Brandon says he wants $100 per door in positive cash flow and a 12% or better cash on cash return. My market is rough so I have dropped my metrics to $50 per door cash flow (in bust times) and 8% cash on cash return. Other than that, what value is there that I should be considering? Am I missing a piece of the puzzle when it comes to determining what I should pay for a property?