I live in AZ. I am new in investment properties, and thought it might be a good idea to partner with a Realtor. I have spoken with two so far, and each of them wants to partner with me. The idea is for me to put the initial investment / loan for a property they search. They will then fix it, and flip it, and we share the profits.
How do we come up with a profit sharing scheme here? One of them seemed to think it should be 40-60 , me 40% , and he 60%, since he is doing the labor and fixing homes to flip. It didn’t seem fair. Before I negotiate, could some one pl give me advice in the area if you have similar experience? What are different options available in this case?
How should the partnership deed be made? Any links? Any suggestions on reading up info on this?
Thanks in advance!
Thanks so much every one for your help! I did some thinking, and came up with the following plan.
1) I make the initial investment (payment), including closing escrow. The Realtor does all of the fix up using his network (which he claims is cheap). He lists the property and we flip it for a profit.
The only cost during selling will be the sellers agents fee of 3%, plus the Realtor (buyers agent) has to pay broker fees it seems. While buying, what ever commissions he get’s goes toward the house.
Now: if I have the Realtor spend money during repairs, what should be the profit sharing model?
Also, if I am willing to pay for all of the repairs, done by his network, what should be the profit sharing model?
Is anyone living in AZ have a similar experience to share?
Thanks so much once again for all your help!
loanmasterone 5:05 am on February 3, 2010
Investing in real estate with partners is very rewarding as long as each party understand the dynamics of the partnership as well as the percentage each is to receive per transaction.
You would also need a signed agreement between the investors as to the role each is to play in this partnership. You might have a limited partnership, or some other type entity indicating the relationship of all concerned.
Also how title to the property is held prior to the closing and flipping
There are several things you need to know when investing in real estate or buying foreclosures, probates and other distressed properties for flipping.
First of all you should go to the nearest book store, purchase several books on buying, fixing and flipping foreclosed, short sales and other distressed properties and real estate investing. There are several that you might be interested in.
The real estate business change from time to time, so you would need to attend any legitimate real estate seminars that would be in your area or you can attend to keep up with the current trends. Business as usual can easily put behind the eight ball.
You will also want to find out if your state is a non-judicial or judicial foreclosure state. This will assist you in making offers as well time frames in which you have to work within when purchasing a foreclosed property.
Once, or, while you are doing this you should buy one of the TV guru’s distressed property programs. These programs will give you some legal forms you might use when writing an offer to purchase a property. You will also find several scripts to use in talking to your potential clients. The also give you tips and a formula on how to figure if you have a property that you can make money from before buying.
If you are without funds to accomplish this business, you will have to find some investors that will assist you. You will have to make a deal with them about a certain percentage of the profits made from the sale of the property. You will have to advertise in your local newspaper for these type individuals to assist you in buying and flipping.
Another method to use when you are without funds to assist you in buying investment property is to get the deal under contract in your name after which you wholesale the deal to another investor and let them do the fix up and repairs. You can collect anywhere between $5,000.00 to $10,000.00. In high cost property states you might even get more for wholesaling properties.
Normally this is 50/50 however it could be more or less depending on how your relationship is with the investor.
Now to purchase a foreclosed property depends on what phase the foreclosure is in.
#1 Pre-foreclose- the owner is still in the home, he has been notified that he is in foreclosure. Now he has to come current or the foreclosure will continue.
You can make an offer to the owner at this point, give him something in his hand to purchase his equity. Now you will also want to see if there is any repairs that need to be done on the property. If there is you need to know the cost of this repair. You will need to know how many months he is behind in his mortgage payments as well as any fees that the lender has incurred in trying to collect the mortgage payment. Now add these together to include what you had to give the homeowner. Also you must include how much you will need to hold the property, I mean making the mortgage, paying the insurance and taxes while you repair the house for sale.
Now find out the balance of the mortgage add this to the above figure. Now you need a method of finding out the current value of the property. All this information will tell you if you have a deal or not.
#2 The other way to purchase a foreclosure is when the property goes to sale. At this point you must have all cash and you must be able to prove that you have whatever the minimum bid is in cash, cashier’s check or money orders. If you have no proof you will not be allowed to bid.
#3 One last way is after the sale. If no one bid and get the property at the foreclosure sale, you may find out what bank owns the property, write an offer as well as a check as a deposit not to be cashed until the offer has been accepted. You might also inform them as to how and when you plan to come up with the remainder of the sales price. I have know some lenders to accept offers this way before the property is turned over to a real estate broker to sell.
Now you have to determine how you are gonna market yourself to get.
#1 You can purchase a pre-foreclosure list from a list broker (Join the crowd most do this and mail letters to the person that is in foreclosure)
#2 You can advertise in your local paper that you are in the business of purchasing foreclosures.
#3 You can do a direct mail to people in your city stating that you are now in the foreclosure business.
#4 You can do the research at the county recorders office yourself (tim
Obviousman 5:05 am on February 3, 2010
That’s funny. The money lenders I contact always want 70%. LOL.
David Z 5:05 am on February 3, 2010
who needs a realtor?
no way the guy with money gets lets than 50%. do not be taken advantage of. you have the cash so makes you king. these guyes will make 3% on buy side and and another 3% on sell side to start with. they are already eating into profits.
if they cannot put in cash they no profit sharing. they have to have money at risk or otherwise no fair. you cannot get profits if you never risked money.
Mike 5:05 am on February 3, 2010
You don’t need a partner to flip houses, especially one with no equity in the relationship.
Find a good attorney, and a good contractor, and pay as you go.
Realtors are a dime a dozen, and in your question, the realtor brings little to the table other than another drain on profits.
If you’re serious, a good realtor will get involved for the commissions alone he can earn off you, after all, that’s what they do.