How much to pay for referrals/deals?

13 Replies

We are starting several new marketing campaigns and wondering what folks pay for leads that become deals.  How do you structure it?  I was thinking a grand per deal that their number brought to us.  (Every birddog that works for us has a separate number so we can track the leads/deals and pay them accordingly)

Thoughts?

Very subjective.. We offer 20% of the profit. Keeps em motivated and hungry. I just don't feel like $1000 is enough unless it's a small spread. Everyone has their own way though and if you have guys that are constant and only require a grand then that's great!

@Zach Mitchell No, if we close the deal and we have someone that can wait until we sell to pay them out (3 months usually), we will pay 20% of our profit. We wouldn't know the profit until we close the second time.  If they want paid up front, then that price is negotiated and likely lower. 

@Zach Mitchell would you only pay the $500-$1000 if it turns into a deal? And $0 if it does not? Seems like an off-market deal would be worth more than $1,000 if it's paid only when the deal happens. If it's a $40K deal to you, $1K seems a little low to me, but this model is very new to me, so I'm just asking to learn. Thanks!

@Sean Dolan  You can't pay if it doesn't turn into a deal. Someone could drive around for an hour and send you a list of 100 houses that they think are vacant or distressed. You can't pay them a referral on all those deals. You could pay someone like that by the hour or a flat fee for a day and then a bonus if you close on any of the deals, but that's them working in a different capacity. You can pay someone $10/hour to do this kind of job so there's no reason to pay more than $1k for just a referral. 

@Sean Dolan - profiting 40k on a deal would be awesome but those are rare (at least for us). And be happy to pay a bonus for that!!

Im thinking of all the deals where we make 5 wholesaling.

My guys in Memphis are pumped to make 1000 per deal!  

I don't want to be cheap but I also want to make sure there is enough meat on the bone for our biz too.

@Zach Mitchell @Elizabeth Wilson Understood - My questions are from the perspective of online lead generation, where we know the person is looking to sell their house quickly, so they are a motivated seller - not the driving for dollars approach (which, as Zach stated, I agree those leads are of very low value individually, since it is a lot of guess work). But someone who is reaching out for someone to sell the house to, those would be a higher value lead.

I currently have a real estate client in my local area that I generate leads for, so while my specialty is online lead generation, I'm looking for alternatives in my local area for my own deals, which is a good exercise for me. I appreciate the knowledge shared from you both.

$1,000 to pay a bird dog for a deal is very high! What are these folks doing? Are they finding deals, talking to sellers and delivering a deal at a discounted price or are they just driving for dollars ad giving you a list of houses with overgrown grass? If it is the latter we have always paid $250 if it turns into a deal, in the former example $1,000k is appropriate because it is like a wholesale fee and 1k for a wholesale fee is pretty cheap!

@Stephen Akindona -  that makes sense.  I'm thinking of it more as leads that call that turn into deals rather than one more address to market to.  If (through their marketing which we provide) they get someone to call and that becomes a deal it is worth way more to me than an address.

Do you think that is still too high?

I think it's high but in the same breath if you've got a group of talented deal finders and offering 1k per deal will motivate them to really hustle for you and it boost their production it might be a cost worth paying, I guess time will tell you if it's worth it!

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you