Real Estate Investor · Minneapolis, MN · Member since 2013 · 4 posts · 0 votes
Hello BP community,
Interested to discuss how other real estate professionals exchange their services for ownership percentages in buy and hold deals (multi family <4 units).
Specifically, we would like to provide brokerage services (transactional, leasing, prop management) and maintenance services (up to 10 hours a month), IN EXCHANGE for an ownership stake in buy and hold deals.
Curious to hear from other professionals who have conducted such deals, what ownership percentage was negotiated, and other related thoughts.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
The only such arrangement I have ever heard of for this is between relatives.
Does sound like you have really considered the numbers here. A 4plex say pulling in 1200 a month would have mgt at about 120 buck or 12 buck an hour. That 4plex would be say 120,000, so monthly you want one tenth of one per cent interest? It will only take you 83 years to own the place! :)
Real Estate Investor · Minneapolis, MN · Member since 2013 · 4 posts · 0 votes
13y
Thank you Bill Gulley,
To clarify, long term hold would be 7-10 years (more of a mid-term hold I suppose). When we sell, we would have an ownership percentage in the deal. My partner and I are thinking somewhere around 15-20% ownership is reasonable in exchange for brokerage services (finding the deal, transactional, management, leasing) AND maintenance services (routine and preventive of up to 10 or so hours per month).
We have an established property management and maintenance company already, as well as several investment properties-- seeing this as a creative financing option to scoop up a dozen or so more investment properties....
I am curious to speak with other investors that have arranged such a scenario and what percentage ownership they arranged.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Then you must be a broker if you have a PM company. Now look to "net listing" issues, where your fees for services are based on an equity amount or a net sale, what you propose is very similar, working for an owner then selling and you netting out a profit or payment as part of the equity or sale price.
While you might agree, when you get to the end of the road I'd bet you couldn't hold the owner to it.
But, instead of me just being the "You can't do that guy" look at it from another way, the owner pays you a sum certain and you then have an option to purchase an interest in the property. You can buy an interest and divide interests to property.
But really, do you really need to go there? What about real costs expensed in mgt of the property? How are you breaking that down? Do you buy the Mr Clean to clean the place, do you pay for the paint brush, gas/oil for mowings and maintenace on equipment?
If you're the mgt, then are you taking tenants to eviction? Who pays filings, need an attorney, I can see such being passed on to the owner, but where does the money come from initially to begin actions?
Are you charging for repairs, contracting labor and materials?
You keeping your lease and documents in compliance as a mgr at your expense? Your company expenses? How do you show income, you'll be recognizing income as an equity, in trade, still a taxable issue for you but you have no money to pay it....
I'd suggest you think of lowering your mgt fee and compensate in other ways, like through maintenance and repiars and contracting fees.....some do that. :)