Taking on a money partner for marketing expenses. What kind of deal should I work up?

7 Replies

Hey Guys, 

Want to ramp things up and start spending about $1.5k/mailing/mo on marketing for seller leads. 

Would like to take on a money parter to pay for all or some of the costs.  

What kind of deal have you done or recommend?  

Why not try a cheaper alternative? Listen to this and you might be able to cover the cost yourself. 

Good luck

Thanks for the info. 

Unfortunately, bandit signs  won't work for a good chunk of where I am targeting and I'm looking for way bigger results than D4D. 

Was thinking of  offering  20% of profits of whatever campaign the investor funds.  6 months campaign. Six mailings.  

No idea what's fair tho. 

Any help on a fair deal would be awesome. 

So you want someone to front you $9000. And in return, they will get 20% of the return, which could very well be $0? It is hard to imagine anyone going for that. The expected value of their investment would be higher buying scratch tickets.

If someone else is putting up all the money, in an investing niche that is really all about marketing, why would they give you 80% of the potential profits?

I think you have your percentages reversed. Even then, I would never take that deal, unlessyou have a fantastic track record.

Not sure about scratch off tickets but... you're probably right. Would have to show past performance to work that deal. 50/50 is probably more realistic. 

Anyone ever done a deal like this?

If you can find someone to do this offer them a 10% return as a loan.

As a potential investor I'd consider this VERY, VERY risky.   The most likely outcome is you spend the money and don't never close a deal.  So, I'd only do it as a personal loan and you'd be on the hook for principal and interest regardless of the outcome.

To even consider some sort of profit split it would need to be very biased toward returning my capital.  Such as 80-90% of any profits until 100% of my $9000 investment is returned and then something like a 50/50 split until I've earned another $9000.

The difference between this and a money partner on a fix and flip is that there is no security.  As an investor, I'm investing $9000 which is effectively the entire value of our venture.  That's a very difficult sell.

This is really the sort of thing you self fund to get your business off the ground.  Personal loan, loan from friends or family, credit cards, 401k, something like that.  Once you close a deal, plow that cash back into more marketing.

Originally posted by @Thomas I. :

Not sure about scratch off tickets but... you're probably right. Would have to show past performance to work that deal. 50/50 is probably more realistic. 

Anyone ever done a deal like this?

 Actually, I am quite serious about the scratch tickets, where you can compute an expected value pretty easily.

And you misunderstand me on the past performance.  If you had a real record of past performance, I MIGHT do something like this for 80% of the action.  50-50 is, IMO, never going to happen unless you are dealing with a sucker.

In reality, the scenario Jon describes is what you are going to have to be looking at.

I don't think there's a number that will make this deal work. If you start getting up to the range of an 80% split for the investor, which is probably where it'd be somewhat fair given the risk, the issue becomes how hard are you going to work a deal for a 20% cut? At that point I don't see someone busting their *** to close a deal that's only going to result in a $5k wholesale fee with only $1k going to the wholesaler. If a great deal happens to fall into your lap I'm sure you'd do it but I don't think any percentage that covers the risk of the investor leaves enough motivation to close the deals.  You have no skin in the game so it's just too easy for you to walk away from it.  


Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.