Upfront fee for JV on flips?

Question

Ryan Zomorodi · Answer

Collin S. suggestion that you could offer a more generous equity split on the backend, but no money up front. Why would this person need the money up front?

We never charge upfront fees with our fix and flip partnerships, whether our partner is new or experienced.

I'm very curious what you find please keep us posted!

-RZ

Jacob Hinojos · Answer

Collin S. why couldn't you just take the few thousand you were going to pay them and put it into the purchase, saving them that money, but still split 50/50? Wouldn't that effectively be the same thing, but without the danger of them running off with your money? Not sure if that's a solution, but I would love to hear what other people think.

Ozzy Sirimsi · Answer

Collin S.

I am not sure if it is fishy, they might want to see how serious you are. ( I would)

Obliviously, do your homework,, make sure you are not wasting your money, but a few thousand to learn everything and have %50 part in the deal sounds good.

Question is if it is too good to be true :)) that is for you to discover

Good Luck!!!

Andrew Johnson · Answer

Collin S. Maybe another question to ask would be: Did this investor find you or did you find this investor?  Either way I don't like the idea of paying money up front, but there are a few possible scenarios:

1.) This person has a coaching program (that costs $2,000) and a part of that is you bringing deals for review, diligence, and potential partnership then at least they are being transparent about it.  I may not personally like it, it does sounds fishy, but I can't wholeheartedly run around screaming "scam".

2.) They solicited you about a partnership and in your third call talking through the details they dropped the "by the way, you have to pay me $2,000 up front".  If that's the case, I'd run like the wind.

3.) They don't like partnerships, they think any newbie will be a waste of time, you approached them, and they are thinking: "Well, to be worth my time I'd better get $2,000 up front because they might not bring me any decent deal flow".  I still don't like the scenario but it's hard for me to say it's "fishy" if you approached them.

There are probably other ways the introductions could have been made, I really don't like any scenario when you pay up front for something, but learning more about "how the conversation got started" might be helpful.

Arianne L. · Answer

Collin S. Sounds a little fishy. Why would the investors need a few thousand upfront? What prevents them from disappearing with your few thousand dollars?

I would never split 50/50 with someone who brought the deal if I fund ALL of the money AND manage the rehab. I look at deal, money and managing rehab as 1/3 1/3 1/3 what makes a successful flip. So the most I'd give up is 1/3rd. And it would be much cleaner to just pay you a wholesale fee so you don't have to wait 4-6 months to get paid.

I joint venture with newer investors on flips. The structure is really them being passive money partners and in exchange for a good % annual return, they can be as hands on or hands off the project as they want, and they'll get to see a project from start to finish, and ask me any questions about anything. But we keep it very simple in terms of the business side. My company manages the deal finding and rehab.

Sam White · Answer

@Arianne L.  Yeah...Good point!  Is he trying to put the loan in your name too?  Run, run, as fast as you can

Collin S. · Answer

@Ryan Zomorodi I assume charging upfront fee as I would have no money of my own in the deal. It's a well established investor/rehabber, I'm just wondering if its a good way to get started with little $$, learn the ropes, and see the rehab process from start to finish.

Collin S. · Answer

@Christopher Giannino I mean pay a few thousand up front as a fee to work with them. I put nothing into the deals, just find the deals, bring them over and split the profits.

Upfront fee for JV on flips?

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