How much should I charge this guy?

12 Replies

Met a guy who said he wanted to go 50/50 so I showed him a couple deals. The second one I showed him he was ready to buy. I had to explain to him the 1% rule right there in the kitchen. He's clueless.

Funny thing is he recently quit his big W2 job to do real estate and has his license. I'm thinkin, dude, you're the one with the license and I'm showing you the deals? What's wrong with this picture.

We've both decided 50/50 isn't for him. He has time and the drive to do these on his own he just doesn't known and he's a "chicken little"

He also has 100k from a flip and another 100+k HELOC and wants to put it all in to buy and hold (he's gonna find out quick he shouldn't have lost the W2 before he did this).

So basically he wants to pay me to find him his properties and write out the business plan for each one. He also wants me to PM but I don't think that's a road I want to walk down so I'll refer that part of the gig to a buddy.

He gets to save the broker fee on his end because he is a broker. Basically he's asking me to be his broker and teach him how to be a landlord.

Is 3k per house fair? I made that number up. It could be ridiculous in either direction. I figure free do 5 of them that's another down payment for me!

Fair has nothing to do with what you charge him. You charge what your time, effort and experience is worth.

For sourcing deals I generally charge a finder's fee about equal to but not considered 2% for assets in the $240k-$1.4M range.  'Percent' sounds too much like commission and I'm not licensed.   Doesn't sound like one gets licensed for the 'education'.  Sheesh  

But mine are sourced to experienced investors that know what they want.  To hand-hold and write a business plan for?  Don't know if I'd bother.  

What asset price are you talking about in general @Lucas Carl ?  $10k?  $100k?   Maybe charge $3k plus $x for y amount of your time with the education.  Or maybe a small equity% for your time and expertise.

You're right about him wishing he didn't quit the w2 before seeking loans.  What do they teach in agent training anyway if that and the 1% rule is a new concept?  LOL   

Please keep us posted! 

Hi @Lucas Carl ,

Make sure you are careful and make up a very clear "statement of work". What exactly you are responsible for. You can add in a weekly one hour call for mentoring or something (add the time of course). From the way it sounds I just see it coming back "Can you cover the new furnace because you missed it" and "You never said there would be advertising costs". "This tenant didn't pay on time, What are you going to do now..."?

As far as how much to charge I don't really know. A percentage may be a good route for X amount of time, sort of like a property manager. First half months rent and 10%,20% gross for the first 2 years or something (that puts the success of it still on the table).

Just some thoughts and good luck!

Mike Cumbie, Real Estate Agent in NY (#10401285310)
Originally posted by @Mike Cumbie :

Hi @Lucas Carl ,

Make sure you are careful and make up a very clear "statement of work". What exactly you are responsible for. You can add in a weekly one hour call for mentoring or something (add the time of course). From the way it sounds I just see it coming back "Can you cover the new furnace because you missed it" and "You never said there would be advertising costs". "This tenant didn't pay on time, What are you going to do now..."?

As far as how much to charge I don't really know. A percentage may be a good route for X amount of time, sort of like a property manager. First half months rent and 10%,20% gross for the first 2 years or something (that puts the success of it still on the table).

Just some thoughts and good luck!

 Wish I could vote twice for your post, Mike.

Yes - must have a concise scope of work and a liability waiver.  Was going to mention that but wanted to first try and answer the question at hand about what to charge.  You said it much better than I could've anyway, Mike.  Well done!

Fantastic advice Steve. At this point I feel like he's wasting my time but he keeps calling me. I told him to call 25 small banks in the morning and see if he can get one to even talk to gin about a loan and we'll take it from there.

The guy has his license and he's asking me for properties. How does someone like that even pass the test?

We'll see where this goes. My guess is nowhere because..... how can he get a loan. Maybe he wants to pay cash who knows.

I'd charge him finders fee (3-5%) plus extra for a business plan (5%)

Originally posted by @Rosston Smith :

I'd charge him finders fee (3-5%) plus extra for a business plan (5%)

 So on 100K house you're charging him 5 to find it and 5k for the business plan 10k? 

Originally posted by @Steve Vaughan :

For sourcing deals I generally charge a finder's fee about equal to but not considered 2% for assets in the $240k-$1.4M range.  'Percent' sounds too much like commission and I'm not licensed.   Doesn't sound like one gets licensed for the 'education'.  Sheesh  

But mine are sourced to experienced investors that know what they want.  To hand-hold and write a business plan for?  Don't know if I'd bother.  

What asset price are you talking about in general @Lucas Carl?  $10k?  $100k?   Maybe charge $3k plus $x for y amount of your time with the education.  Or maybe a small equity% for your time and expertise.

You're right about him wishing he didn't quit the w2 before seeking loans.  What do they teach in agent training anyway if that and the 1% rule is a new concept?  LOL   

Please keep us posted! 

Looking at 125-150k houses that will probably rent for 1.2 - 1.3%  He has a large sum of cash from a two builds he did and doesn't want to pay capital gains. 

Not sure where he got the ideas for the flip from because he is clueless about buy and hold. 

I suppose my goal is to get him in to 3 properties and stack up as much cash as I can from him to get me into a property of my own.... or closer to one I should say. 

He keeps calling me every day. I even found him a bank that would work with him even though he quit his job. 

Still looking for ideas on how to charge this guy if you have any. I'll keep updating. He wants to go look at more poperties asap and he's getting preapproved right now. 

Creative financing on my end I suppose! 

Originally posted by @Lucas Carl:
Originally posted by @Steve Vaughan:

For sourcing deals I generally charge a finder's fee about equal to but not considered 2% for assets in the $240k-$1.4M range.  'Percent' sounds too much like commission and I'm not licensed.   Doesn't sound like one gets licensed for the 'education'.  Sheesh  

But mine are sourced to experienced investors that know what they want.  To hand-hold and write a business plan for?  Don't know if I'd bother.  

What asset price are you talking about in general @Lucas Carl?  $10k?  $100k?   Maybe charge $3k plus $x for y amount of your time with the education.  Or maybe a small equity% for your time and expertise.

You're right about him wishing he didn't quit the w2 before seeking loans.  What do they teach in agent training anyway if that and the 1% rule is a new concept?  LOL   

Please keep us posted! 

Looking at 125-150k houses that will probably rent for 1.2 - 1.3%  He has a large sum of cash from a two builds he did and doesn't want to pay capital gains. 

Not sure where he got the ideas for the flip from because he is clueless about buy and hold. 

I suppose my goal is to get him in to 3 properties and stack up as much cash as I can from him to get me into a property of my own.... or closer to one I should say. 

He keeps calling me every day. I even found him a bank that would work with him even though he quit his job. 

Still looking for ideas on how to charge this guy if you have any. I'll keep updating. He wants to go look at more poperties asap and he's getting preapproved right now. 

Creative financing on my end I suppose! 

And yes, all it is is hand holding, and if I had more cash of my own I'd give him 5 minutes of free advice and be on my way, but I closed on 2 deals recently and I'm looking for more cash for my next deal so I'm seeing some sort of an opportunity here. 

I've given him at least 5 books to read and keep mentioning the BP podcasts but he hasn't read or listened. 

Originally posted by @Lucas Carl :
Originally posted by @Rosston Smith:

I'd charge him finders fee (3-5%) plus extra for a business plan (5%)

 So on 100K house you're charging him 5 to find it and 5k for the business plan 10k? 

 Yes! 

@Lucas Carl

From my experience in working with various people in different spheres, anyone who is ready to jump like that, without any foresight, is potentially a trouble maker.

Right now I have one such person who has been chasing me for months saying how much he wants to take part in what I do, was taken on board and all of a sudden went off the radar, ignores emails, chat messages, sms and sends phone calls to voicemail - all the while posting happy photos on Facebook.

If you told your potential mentee/partner to read the books and listen to podcasts and he dismissed your advice, he is going to dismiss your other advice and do what he thinks is right - without ever asking you beforehand or even telling you after he's done it.

@Lucas Carl , sounds like there are some red flags and it could turn into a big commitment of your time.

Since what they are asking for is more in the mentoring realm than RE agent realm, ask for a $3k-$5k retainer to see if they are serious about your time and theirs.

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