A partner and I are working out the details to a partnership
My friend is a rehabber in a city about an hour north of me. I have a direct mail marketing campaign set up in my own town that targets foreclosures. We have been talking about partnering up.
Basically I will be setting up a direct mail campaign for homeowners facing foreclosure in his target areas. When I find them I will negotiate the short sale on his behalf and I will do all of this for a fee. I see this as being similar to a wholesaler/investor relationship. So I've created a way that I believe is a pretty standard way for wholesalers to figure out their wholesale fee.
I will take the as-is value of the property (FMV) and subtract the price my partner wants me to negotiate ($) to figure out the equity I am negotiating into the deal. So E = FMV-$
I will base my fee on the equity I am building into the deal. Something like 20% of the Equity.
So if I were to find a property with an as-is value of $85,000 and I got the property for him for $50,000 then there would be $35,000 in equity. This would result in a $7,000 fee.
The as-is value will be figured by subtracting (cost of repairs)-(after-repair-value).
Is this fair? Is this a pretty standard way to calculate something like this?
[Cliff's Notes]: I will be finding the properties and negotiating the short sale for an investor for a fee of 20% of the equity I build into the deal. Equity will be calculated by subtracting the sales price from the as-is value. Fair? Comments?