How Investors can find a great agent to work with.

Question

I saw a question about how to find a great agent willing to work with investors. Here is my thoughts. First, I enjoy working with both realistic newbies , seasoned investors  & developers who understand win-win propositions.  My up front understanding in writing is that these investors will work me to help them purchase  a property and then list the property to sell after it's  improved. As a general rule I prefer investors who  turn properties but also have an investor pool that buys and holds. I don't discount my commission. An investor needs to know their numbers ( offer price , cost of purchase, improvement cost, carrying cost and cost of sale) in order to follow through and close on the deal. I can help them in all phases of this analysis which is part of my added value. Like successful  businesses, I'm committed to building long term relationships with my clients. My job is to bring positive opportunities to my investor clients. In addition to being a realtor, I'm also an investor/private money lender , so I'm open  and able to assist with funding or joining forces in  joint venture projects  that make sense.  My  base of business is in Silicon Valley where there is lots of competition and high prices. So, one needs to be creative and  collaborative  to get deals in contract and ultimately to the finish line. Stop talking....start investing.

Scott Raley · Answer

Every deal is unique. If I'm providing a  secured loan on the property to an investor, I will charge an interest rate and points, on par with what a private money lender would charge. I typically do not like to go higher that 60% Loan to Value ( LTV) or slightly higher After Rehab Value (ARV) I also will not go in second position behind a large 1st loan. Its all about properly assessing the value of asset and the talent of the team working on the project. If I'm project managing the rehab  and may or may not have an equity position, I would ask for 25% of the net profit for my services assuming the net profit was in the 10-13% profit range. If profits come in above 13% that figure might increase  and max out at 28%. I do like projects where everyone involved has skin the game. Where projects come up where a general contractor is a partner. I would suggest equal  amounts of investment funds between partners (say the general contractor and the investor as 50-50 parters) with a realistic construction budget has been completed. Moving forward both the contractor and investor invest equal amounts of funds to complete construction of the project. Net profits are split 50/50. As an agent you can  also use your projected commission, either as the selling agent (property purchase)and or as the listing agent (property sale) as part or all of your skin in the game. That's easier to do if your a broker. Just think creatively and be very selective about the deals you do and who you partner with. Best to work with people who have a proven track record and are of good character.

Tom Donnelly · Answer

Great info Scott, thanks. Can you go into more detail on how you structure the joint venture and funding deals? Do you do hybrid type deals where you get a commission as well as some type of equity participation?