Working for Shares and lending credit

8 Replies

Hello,

I've recently come across an opportunity to get into a group here in my local market. The luck i've had with getting serious investors behind me to fund my own deals has so far been slim to none and I figured it would be a good learning experience to get in with someone that does it full time that can teach me the ropes. This company owns around 120 doors and growing in the North Minneapolis market, the deal he presented me to start is an hourly wage that applies towards shares in the company for my labor fixing properties with the goal of moving towards the investment side. While I won't be taking this on full time and not receiving a steady paycheck from it isn't an issue, I'm wondering if anyone has done this, or if I can get some ideas on the upside/pitfalls of doing something like this. Are there any clauses I should have in a contract for payouts/etc? The second part of the deal is lending my credit to obtain 30-year notes on new acquisitions and then quit claim deeding the property to the company. For doing this, I'd get a variable percentage of the origination loan amount. Obviously, as most people,  my credit is important to me but I'm wondering if doing a quit claim deed would protect my interests or if there are any extra steps I should take? Any help would be greatly appreciated as I'd like to protect my interests for the future. 

Victor

So you haven't had luck in getting investors to fund your deals, but you are going to provide cheap labor as a maintenance man and will be lending your credit for another investor to further their business for a small origination fee with the hope they will give you part of their business?  

I don't understand how getting a loan on a property for someone else and quit claiming the deed to that person would help your interest in a property.  Quit claiming it to someone else would be doing the complete opposite of protecting yourself as you would be claiming they own the property when you have the loan on it.  I think you can technically file a quit claim deed with the county on a property you have a loan on, but I don't see how there would be any protection for you as you would still be on the hook for the loan.  

If you were to help him get additional properties using your credit and learned enough where you would consider investing on your own, you might not even have the credit to get your own low rate long-term financing at that time so you might be putting yourself at a disadventage.  I think you would need to figure out how your ownership interest would change as a result of financing new properties to make sure you are not just a cheap source of financing for this person.  The way I read it, this person is using you as a cheap source of financing for his own deals since you would be financing it and transferring ownership to his company.

Without knowing more, I'm not sure where there is any benefit to you in this process.  It sounds to me like this person may be taking advantage of you for cheap labor and for them to get low rate long-term financing on their properties.  I don't see where you get any benefit from this relationship.

@Victor Lebegue I, honestly, can't think of any scenario where this works out in your favor. You'll end up with poor credit, a bunch of loans on the books, and zero assets. This sounds like a huge scam and I would run from this and never associate with someone that has any ties to this conpany.
(267) 520-0454

@Victor Lebegue

I like the first part of that agreement (being a handyman in exchange for some equity or profit sharing)

I haven't heard as many arrangements for the second part (lending your credit to get 30 year notes) I'd recommend running that tactic by legal counsel to make sure you're not legally obligated if things went bad on specific properties or the company as a whole. Last thing you'd want is to take out loans and the company leaves you in the dust without and recourse.

@Victor Lebegue F**CK NO! This is fraud!  They are asking you to commit fraud.  You need to run not walk away.  You can't even work with a company that asks you to do this "The second part of the deal is lending my credit to obtain 30-year notes on new acquisitions and then quit claim deeding the property to the company. For doing this, I'd get a variable percentage of the origination loan amount."

People went to jail for this 10 years ago.  If you get involved in this you will be blackballed at the best and if its big you can be investigated, and arrested by the FBI.  This is a Federal crime and it is a Felony.

Tim Swierczek, Lender in WI (#103522) and MN (#103522)
(651) 772-9000

@Victor Lebegue I agree with the others, don't do any business with this person.

The first part they are trying to treat you as an intern perse and they aren't going to pay you.  You will be giving repair services for potentially a little piece of ownership in a private company which likely is structured to hold no assets.  This is likely some way to con you - if the company was worth any money or if they were giving you any value it would likely be cheaper just to pay you.

Second part is not worth it - I also believe this smells like fraud and at some point you will be hung to dry.

I like that you are pursuing other ideas on how to get going, just watch out who you are getting in with.

Good to know. I agree with all the above comments on the credit side of things and wanted to make sure my feelings about lending my credit for something like this were right. My credit is important to me and for myself as a future investor don't want to risk not having any credit to use when said and done. What about working for an equity stake in the company? Couldn't I structure an agreement to have payouts/profit sharing? On second thought if the company is willing to take risks like that then I probably don't want to even associate myself with them. Thank you for the replies! 

Originally posted by @Victor Lebegue :

Good to know. I agree with all the above comments on the credit side of things and wanted to make sure my feelings about lending my credit for something like this were right. My credit is important to me and for myself as a future investor don't want to risk not having any credit to use when said and done. What about working for an equity stake in the company? Couldn't I structure an agreement to have payouts/profit sharing? On second thought if the company is willing to take risks like that then I probably don't want to even associate myself with them. Thank you for the replies! 

Regarding the first option - I think the second option is enough to walk away from them entirely.  You find that people who cut corners and don't operate ethically do this throughout their entire business.  They make money because that is their niche and they save money over more legitimate investors.

Secondly - he isn't going to offer you any value in the shares, it would be cheaper for him to hire out the work.  Also you aren't going to gain any experience from being a free handyman.  He sees someone eager to learn and is trying to set something up that will benefit him and not you.  His sales pitch to you is that you will get experience but even if you do - this isn't the experience you want to get.

Originally posted by @Victor Lebegue :

Good to know. I agree with all the above comments on the credit side of things and wanted to make sure my feelings about lending my credit for something like this were right. My credit is important to me and for myself as a future investor don't want to risk not having any credit to use when said and done. What about working for an equity stake in the company? Couldn't I structure an agreement to have payouts/profit sharing? On second thought if the company is willing to take risks like that then I probably don't want to even associate myself with them. Thank you for the replies! 

As an investor, why would I give you shares in my business when I could just pay for your services?  

The only way I would ever consider it is if it was significantly cheaper to give you a part of my business.  Doing that would likely cost me more money in the long-term than just writing a check now.  

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