Wholesale Agency Structure?

Question

I've starting investing in land and have a steady flow of leads coming in from PPC marketing. I don't necessarily wholesale. I generally buy with cash and then list on MLS or off-market channels. I just started but am already getting more leads and contracts than I can manage on my own. I'm thinking about bringing on some other "agents" to whom I can send leads where they work the lead from purchase to sale and they get a split of the profit on each deal. How are these arrangements typically structured within typical wholesale companies? Is there another way I should be approaching this?

Dylan Robinson · Answer

This is a common and smart way to scale your operation, moving from a solo investor to a team leader. The arrangement you're describing is a joint venture (JV) wholesaling or a commission-based acquisition model. It's a way to leverage other people's time and effort while keeping your capital risk low.

Here’s how these arrangements are typically structured and some alternatives to consider.

🤝 Profit Split Arrangements

The compensation model you're suggesting is a profit split, which is a common way to structure these partnerships. The key is to have a clear, written agreement that defines roles, responsibilities, and how profits are divided.

• 50/50 Split: This is the most straightforward and common model, especially with land deals that often have smaller margins than residential houses. It works well when both parties contribute equally to the deal. In your case, you provide the lead, and they handle the entire process from getting the property under contract to the final sale.
• Role-Based Split (e.g., 60/40 or 70/30): This is a more nuanced approach where the split is based on who does the "heavier lifting." Since you're paying for the PPC marketing to generate the leads, you could argue that you're taking on more of the financial risk. A 60/40 or even a 70/30 split in your favor might be more equitable, giving you a larger percentage for the initial lead generation and financing.

It's also important to define what expenses come out of the profit before the split. These could include:

• PPC advertising costs
• Due diligence fees
• Title and closing costs
• Marketing and listing fees for the final sale

Example: You get a land contract for $20,000 and sell it for $30,000. The profit is $10,000. If you have a 50/50 split, each person gets $5,000. But if you have a 60/40 split, you get $6,000 and the agent gets $4,000.

⚖️ Legal Structure

Instead of just having an informal arrangement, you should consider forming a legal entity, such as an LLC (Limited Liability Company), to manage these deals. You would be the managing member, and the "agents" would be contractors you pay per deal. This structure protects you from liability and makes it easy to track income and expenses.

An LLC Operating Agreement can clearly outline the rules for profit splits, responsibilities, and dispute resolution. It's a document that protects everyone involved.

💡 Another Approach

Another way to approach this is to hire a virtual assistant (VA) or an acquisitions manager on a fixed salary or hourly rate. This is more of a traditional business model where you pay for their time, and you keep all the profits. This might be a better option if you want more control over the entire process and a larger percentage of the profits. However, it also comes with more overhead and risk.

Your current idea of using a profit-split model is an excellent way to scale without adding a fixed payroll. It's a win-win: your partners are incentivized to close deals because their income is directly tied to the success of each transaction, and you're only paying them when you make money. The most successful approach is the one that allows you to continue to grow and focus on your strengths—which, in your case, is finding leads.