Scout (birddog) Needs Advice On Deal!
Good evening. I just started scouting for an investor to get my feet wet and need some guidance on how to figure my percentage on this particular deal.
The property is a great two for one. Two separate lots, one has a small bungalow (can be rehab) the other is all woods. A paper street runs along side both properties and will need to be paved. Each lot is 125x125 and the seller is asking only 150K.
As you know, this is the perfect opportunity to develop and build one or more homes. Both lots are zoned R1 -single dwelling and will need to present options to the planning board.
The options can range from: rehab the bungalow and build a single home on lot 2, build modular twins on both properties or build three new modular singles or??? The single homes in the area are selling for approx 200 to 240K.
The investor knows I’m green and is willing to give a first hand education on this project from beginning to end.
Question- without knowing the outcome from the zoning hearing and consideration for the mentoring aspect, how would you determine your percentage without knowing the total value of the properties?
Your advice is greatly appreciated.
Alot of what ifs there would be alot of expensies here. what is the area zoned for? site will need site plan approval and then there is alot of paper work to get this done in the city. Has the investor told you what there offering you?
I should have said before on the zoning was are you sure it is this way and not changed recently?
I would come up with a reasonable price and let the investor run with it but dont wait till the investor gets all the aprrovals before getting paid it might be a long time
I guess the answer depends on what value you would place on the education you think you'll get from the investor and how much of the work you'll be doing.
Most bird-dogs work for a straight fee: get the lead to the investor, they either sign a contract or close and you get paid. If some of the payment comes in the form of education, all the better.
Percentages of profit may start to enter in on assignments where you do a lot of the work: you set up the whole deal and sign up the seller, then assign that deal to the investor--for a fee or a percentage of what YOU believe the profit potential is (of course, this depends on you knowing what your investor(s) are looking for, profit-wise).
I've been given offers of anywhere from $500 to $2K for birddogging leads (realizing that offers mean little--it's the payment that talks). Some investors tie the payment to the amount they think they'll make, some just use a flat rate.
Whatever you decide it'll be, make sure they pay you--if they don't, please don't hesitate to go to the local REI meetings and mention this fact to anyone who will listen. It's bad enough REI'ers get a bad rap from realtors and the general public, we don't need the welchers and scammers working on US, too!
Andy
Thanks for your replies. There will be a signed contract between us. The investor has paid a small fee and is offering 3% of the sale price of the new homes in exchange for paperwork and legwork and education. Since I do not have a RE license, I will be listed as partial owner so I can sell the homes.
As far as zoning, the investor has been dealing with this particular township for many years and is confident the zoning board will grant a subdivision. This is not in the city.
I will have a signed contract before proceeding which should be the end of the week. Afterwards, present an offer and if the seller accepts move forward.
Being a newbie, I think this is a good opportunity. Thank you again for your expert advice. I'll keep you informed.
I have a signed contract with this one particular investor and received payment. I suggest you work out your fee b-4 presenting any properties. If the person(s) are true investors then they should not object to a contract.
If is difficult to trust people - especially if you do not know them professionally. But it is a good way to learn one aspect of the business especially when your new.