Birddogger Wants 50% Profit
I think I know the answer to my own question but please let me know your thoughts. I have a partner who is also a very good friend in VA. he called to tell me that a guy he works with found a property that is 10 acres for 20k. and according to a logger, the trees on the property are worth 20k. so, needless to say if all this info turns out to be correct, then its a pretty good deal. the plan would be to buy it and have the logger take the trees and pay us, then we would sell it to a builder or whoever for 10 to 20k for profit. problem, the guy who brought this to my partner says he wants half of the profit. he doesnt have the money or credit to buy it himself, but he wants somebody else to buy it(me) and share in the profits. my answer is no, but I would be glad to pay him a birdog fee of 500 dollars or 1k. my partner is a little concerned about presenting that offer to him(he thinks we should split the profits with him since we would not have known about it anyways). am I missing something? thanks in advance for your thoughts.
Dan,Since there are three of you split the profit equally amoung the three parties involved.
Well did the erstwhile bird-dog give you the address of this property?
Think about this a little, what if the birddog figures out that he can get the seller to sell him on land contract (or some other mechanism), or gets the logger to pay him up-front. Then the question becomes, why does he need you?
There is a simple answer to this, if you do not give him what he is asking for, and this is as good a deal as you describe, than he will find another investor who would give him what he wants. If you think 50% is too much then try to negotiate a little less, it's just unlikely that he will accept $500 or $1k
ok, so maybe I am missing something. acouple of questions. I thought thats what birddogging was, finding deals for people for a fee? now I know the fee varies with each deal, but I have never read on this site where someone gave half the profit for the lead? plus he gets to get in on all the possible upside, and none of the downside. if I have to take out a heloc to buy this property he is not going to help with my monthly payments. and what if the property sits and no one buys it? what if the logger takes the trees to the mill and they dont give him as much? these are all things that he isnt responsible for yet he gets half the profits? all reward and no responseability, sounds really nice. I get emails all the time from birdoggers that say they have a deal worth 20k or so in equity. I dont think there finders fee has ever been over 2k. yet I possibly am going to make 20k they still only want a finders fee. anyways, I realize that I dont have to do this and he can go on to another investor, just wanted some thoughts. all of yours have caused me to re-think it a bit, thanks , keep em comin.
It doesn't sound like this guy's a real birddog, just an opportunist with a lead. Still, he's named his terms and is bright enough to realize he's on to something. After all, he appears to be holding the cards here. Be thankful he's not well funded or he'd never have mentioned it. And know you can always walk. If there's enough profit in the deal, who cares if you split it? If not, just tell him no thanks.
I always like to offer a choice to buyers, sellers, etc. to get them thinking about altermatives instead of yes/no. Tell him, "I never know exactly how deals like this will turn out, but I feel comfortable offering you X% up front, or Y% (lesser amount) now plus Z% of the selling price later. See if he wants the bird in the hand or the two in the bush. And get it in writing, obviously.
The real question here is is he just birddogging the deal, or is he planning on partnering on the deal?
If he is planning on doing all of the legwork to get this deal going, work out the logging deal, and/or the resell deal, then this is a partner and should be compensated as such, whatever the split.
If all he is doing is referring this possible deal to you, and expects you to work the numbers, do the haggling, etc, etc, then it is a birddog deal, and deserves a flat-fee paid.
Of course, this is all my humble opinion, and more importantly, you would have to decide if a part of a $20K profit is better than a whole of $0K profit.
Roger
I agree Dan, that taking on the risks is the biggest part. Your friend must have a relationship w/him that he does not want to insult him. And how could he really expect 50% if there are 3 of you?
Who is doing the research to assure those logging profits and negotiations? Him? That has value.
And, of course, who will work to get the developer or has researched that possiblity? That has value.
In Va. there is plenty of land that will not have value for building for a long time, if ever. Who is checking into that risk? If a partner, he has to stand to loose as well as gain, right? I don't see that this is a slam-dunk yet.
yes, exactly, I think that is my biggest concern. this is not a slam dunk yet. and really it wont be untill the land is logged, paid, and sold. and thats my point, he gets to come along for the ride and if it gets bumpy he gets to get off. if its not bumpy he gets to stay on and get paid. of course if this was a slam dunk and I knew for a fact that I would be walking away with 10k the I would do it for sure. but I Dont know that, its just like all investing, a risk, a calculated risk, but still a risk, a risk that is not his, its mine. I dont think half is worth it, 25 percent sounds better. if he finds a investor to take all the risk and half the POSSIBLE profits then more power to him. not to mention vacant land is almost always riskier.
As a Wholesaler I pay $1000 for this type lead.
But first I would have a Graduate Forester appraise the property. Good Luck. Herbk, WPB, FL
The main question that we use when determining how much to pay someone for bringing us a deal is 'When do they want to get paid?'. If they want to cash out right away once we acquire the property, then we pay 10%. If they want to wait until we have flipped the property, then we share up to 50% of the net profit on the deal. This takes into account all of the expenses incurred while holding the property, including mortgage and interest payments made. The more they contribute to the deal, the higher their percentage... but if they want a higher share of the profits then they don't get paid until we get paid. We have no problem sharing half of the profits once we have hard figures instead of projections.
If you present it this way to the guy you are dealing with, it gives both of you some options. Depending on his financial situation, he may decide to cash out right away if he knows he can get 1k-2k now instead of waiting indefinitely for a larger amount. If he decides to hold out for a larger share, then you can clearly outline what role he needs to play in the deal if he expects half of the profit. Make it good for everyone involved... he'll get motivated to bring you some more deals
Far too many variables here. All you have is the comment of some logger that you have $20k worth of trees there. What does that mean? Is that a retail estimate? Will other loggers offer you that kind of money to go in and get the trees? You need real hard data from more than one source, because your whole deal is contingent on this.
And, what will the property look like afterward? Piles of rubbish and rutted logging roads left for you to mess with? And 20 acres of tree stumps?
I would never assume a quick resale on raw land. It can sit there for years. And probably will. Who will pay the taxes year after year?
The only way I can see taking a non-cash "partner" into this scheme is for him to only profit at the final exit of the deal, that is, at the sale of the property, and he has responsibilities to bring it to exit. Give him the responsibility of selling it. Now he's earned his part of a 3-way. But you get your initial investment out first with those trees (if it's even possible).
And I think you need to decide what you're going to do if it doesn't sell for 7 or 10 years.
true, lots of variable still. just wanted to get an opinion about this guy wanting 50 percent, before I did a lot of investigating and wasted time. if this guy wants 50 percent of the profit and none of the work, then its no deal. if the land were to sit my partner works for a modular home company and can get a good deal on a home to put it on, then it should sell no problem. after all the posts I read I emailed my partner and told him to tell the guy he can have 1k at closing and run, or if he wants to hang around and split the costs 3 ways then when we sell the land we will split the profit 3 ways. thats 33 percent rather than 50. I will see what he says to that. thanks to all for your replys, you were a big help.