You slighted yourself and the value of your time and expertise on the negotiations here… Assuming that you negotiated a deal that is worth 25K in equity, under FMV… times 10 units… What is that total worth…? It looks to me like it is worth 250K under FMV… You took 33K… Plus whatever you are getting on the financing… but I didn’t follow that “gave a 1.25% prem for guarantor of loan” ???
Your compensation should have been in the range of 7 to 10% since you are taking it on the backend… maybe less if you are taking it in cash… So you should have gotten a 10% stake in the deal, with nothing out of pocket on your part… and they investors should be feelin pretty good about that, IMO.
That means that the investor would have gotten into the deal for about 90% of FMV, maybe less, even after your fee as an equity share… Not too hateful…
I have just negotiated a deal to buy 10 condos in Florida. I have a group of investors joining me in the deal. I do not know how to value my work putting together the deal. We bought 10 units with an average market price of 162K/unit for 135K/unit. I need to tell the investors how much to pay me for putting together the deal. I don’t mind being paid on the back end when we liquidate units.
Posted by Ed Copp (OH) on August 04, 2005 at 16:57:06:
Take a part ownership for your work. This way if we have runaway inflation you can share in that, or if the bubble bursts you will be entitled to your share of that pain.
It all boils down to did you make a good deal or not? There is no way to really tell until the project is sold.
Ed, Thanks for the insight. This is what I finally ended up doing. I gave myself a 2.5% on the deal, and gave a 1.25% premium for the guarantor on the loans. I had heard that some people take from 5 - 15% when they bring a deal. Since this is my first I descided to take it easy. Do you think I am being fair to the guarantor?