All Forum Posts by: Carlton Ellis

I want to thank everybody for their replies. The information has been very eye opening. If there are others that are doing rehabs by all means feel free to comment.

Based on your post and Blake's would it be more important to have a buyer or several buyers lined up first? We all know there is a glut of homes on the market. Depending on what part of the country you are in the supply part of the equation is really not that hard. It's finding serious buyers that is the key to making these deals work.

That is fair enough. What do you feel would be a more equitable agreement?

How do you feel about Bill Gulley's suggestion that a joint venture be formed with both the REI and the consultant? Then when the REI is ready to buy a property an option is put on the property with a split based on prior agreement between the consultant and the REI. Immediately after closing the REI buys out the consultant and the deal is done?

Thanks for your reply Bill I can appreciate how your approach can facilitate a transaction that basically addresses the purpose of my orginaal post.

Thanks for you feedback that is why I put this out here for discussion.

"There's no way I would ever agree to allow a bird dog to go on title to a property I am buying.".

That is EXACTLY the reaction I was looking for. Remember the agreement is centered around an OPTION. As long as the REI pays the brid dog within the agreed upon time period then the OPTION becomes null and void.

The REI also has the ability of offer to buy out whatever equity stake is held by the consultant at any time for a value equal to or greater than the original value of the OPTION. Remeber this is an AGREEMENT. The langauage can be changed so the the consultant HAS to forfiet any equipity stake upon payment.

The focus of the agreement is NOT to get an equity stake in property it's to insure the REI is highly motivated to pay for services rendered. As long as the REI pays and pays within the specified time period there is not risk in terms of title iisues, equity stakes etc.

Let's not forget that once a bird dog gives information to an REI it's basically a matter of good faith that the REI will compensate the consultant. Sometimes in business that is not enough.

There have been several discussions throughout Bigger Pockets.com about the legality of providing property locating services or "Bird Dogging" for REI's. I was thinking about this issue this morning and came up with a concept I'd like to run by folks here and get their feedback.

Establish a consultant type agreement with an REI to provide property location, property assessment or analysis or referral service etc.

The compensation for such an agreement is an Option. The terms of the Option are these:

1. The value of Option is based on either flat rate or percentage the Consultant and REI agree upon. The Option represents an equity interest in any property purchased or brought by the REI based on services provided by the Consultant

2. The Option goes into effect in X number of days after an REI successfully closes a transaction on property referred to him by the Consultant.

3. The period between the time the transaction to purchase or sell a property is completed and the exercise of the Option is a "window". During that "window" period the REI can pay the Consultant a lump sum payment for the full value of the Option. At that point the Option becomes null and void and the Consultant relinquishes all equity rights associated with the Option.

4. After the "window" period if no payment has been made to the Consultant the Option now represents and equity interest based on the value of the Option.

5. The REI is then bound by the agreement to either go forward with any legal proceedings in X number of days necessary to show the Consultant has an equity stake in the property. Failure to do so represents a violation of the agreement. The Consultant can also write language in the agreement so that it's understood that the REI is responsible for all taxes, fines, and other financial and legal obligations associated with the property. In essence the Consultant then becomes a "Silent Partner"

6. Write language in the agreement that allows the REI to buy the Consultant out of his equity. If the REI sells the property he is obligated to pay the Consultant whatever is stipulated as part of the value of the original Option or whatever percentage value stipulated in the original Option.

7. The Consultant at his discretion can write language in the agreement that allow the REI to buy the Consult out of his interest at price that equal to greater than the original Option price.

8. A non-discourse clause protecting the confidentiality of the REI and any business information provided by the REI is part of the agreement.

9. A clause is included that stipulates the Consultant is in no way authorized to negotiate or enter into any agreement on behalf of the REI. This clause also stipulates the Consult is an independent contractor for the REI and the REI is under no obligation to provide any benefits normally associated with employment i.e. workman’s' comp or health care etc.

10. The basis for termination of the agreement is included.

The objective of the agreement is to avoid "brokerage" issues that are a key point of legal contention when providing property location services. The Consultant either gets paid for the value or the option of becomes and equity partner.

The agreement "motivates" the buyer or seller to pay the Consultant in X number of days or have him as an equity partner. Depending on the business relationship of the parties involved this may be intended or desirable.

If the Consult gets equity in the property in question he has no controlling interest. On the other hand it's clear in the agreement the REI is responsible of all financial and legal obligations.

Protects REI and defines the fact the Consultant is not authorized to negotiate or enter into any agreements on behalf of the REI. It also protects the Consultant if the REI is not ethical. It also ends the contention that a Consult is "brokering" a real estate transaction.

Provides confidentiality and non-disclosure for the REI.

Defines in clear terms that the relationship of the REI and Consultant is one of independent contractor and only becomes an equity partnership based on the terms of the agreement.

I know that is a lot of digest but I'm eager to get feedback.

Which of the two courses do you prefer and why?

Thanks for your reply. The information you provided is a great place for me to start.

:lol:

The current economic downturn and real estate market offer a great opportunity for rehabbers to make serious money. IF they make the right choice when buying property. My questions are these for experienced rehabbers:

What is the biggers rehab you've done on a property in terms of cost and extent of repairs?

What the single biggest repair expense you've seen on a rehab? Is this particular expense a recurring theme in your rehab purchases?

What is the largest expense you've incurred on a roofing job?

What was the largest expense you've incurred on an electrical job?

What is the largest expense you've incurred on a plumbing job?

If you have done a total rehab i.e. floors, roof, electric, plumbing, structure, masonary, appliance etc. how much did it run you.

If you can also indicate the type of property i.e a SFR with the number of bedrooms and baths or a multi-family rental with the number of units it would be great. I'm just trying to get an ideal of the repair side of rehabbing. After all more often than not it is what makes or breaks a rehab deal in terms of profitability.

This area hasn't expreience the degree of economic downtown that many other parts of the country have. The employment market is one of the strongest in the country and real estate prices have not slipped as much as other parts of the country.

The issue in the Dallas/Ft. Worth area is that $100,000 to $150,000 is either going to buy you a smaller home in the area or older housing stock if you go for a SFR. In the downtown Dallas area a one bedroom condo is avialable that price range. A two bedroom condo might also be available but much more difficult to find.