Private Money Partnering

Evaluating Opportunities

Chapter I (continued) Evaluating Debbie Or Dan Has-A-Deal

Important Factors to Consider

Level Of Professionalism

How professional are they in their approach to you? Was their approach businesslike? Were they willing to give you references from other people they've done business with? Can you verify personal, character, previous job, other business experience references? If they haven't had much real estate experience, are they prepared with names of experienced real estate professionals who can give perspective on the deal they’re offering?

When I first started out in this business I didn't have much money, but I did have some real estate knowledge, prior business experience, and the ability to sell my services to other people. So I developed a presentation, a flip chart, and a two page brochure which told about what my company did, which was to provide real estate investment services on an individualized basis. I gave people a specified rate of return or a percentage of ownership based on how much cash was involved. I told them what were the benefits of working with me, what I could do for them, what my experience was, and what their level of involvement would be.

Basically what most Money Mommas/Money Men want to do is nothing except see their money work. Most people want “no hassle” investments. That situation is good for a Debbie or Dan Has-A-Deal, because you want to have control of what you’re doing. I would offer major decision making opportunities and a consensus approach, but they would always ask my recommendation.

Type Of Compensation

How do they want to be paid? How should they be paid? Considering that you’re in charge of how much your money is worth and you’re evaluating this person with a deal, the question often comes up about the amount, type, and timing of partner payment. Should they be paid on the front end, before the deal is finished, or in the middle? Or only at the end? A plumber doesn't get paid until job is completed, but a stockbroker is paid a commission or transaction fee on his recommendation, at the time of purchase, whether the stock actually goes up or down later. A property manager is usually paid on a monthly basis. A real estate agent is paid only after the house is sold, and the service is performed, if the house actually sells. Actual profit is not determined until the end, but there are ongoing management and operating costs. True, there are a lot of factors, and this issue is one of the points which must be negotiated between the joint venture partners.

Another consideration is how much you think that somebody experienced is worth as opposed to somebody who isn't? Who is going to pay for the learning curve, if they’re just starting out in real estate investing? There’s a great deal to know to make real estate investing successful. For instance, when you went to college for whatever career you were supposed to be going into, did you make a living while you were learning? Maybe not at the
beginning, but before you graduated? Again, that’s paying for the learning curve. However, sometimes it is worth it, because of the caliber of Debbie or Dan Has-A-Deal, or because the deal is so good, or because it’s the best growth use of your money.

As the Money Momma/Money Man, if you've been watching a real estate investor who seems to have real deals and people in the deals seem to be happy, but you demand, for the use of your money, the moon and green cheese, don't be surprised if they say, “Thank you, but no thank you.” You have to leave enough money on the table for it to work for both parties.

Of course, every Money Momma/Money Man wants to be a partner with someone who appreciates their participation. In contract, who wants to be a victim of the greater fool theory? If the deal is marginal, the deal maker will have a hard time selling it. However, sooner or later the deal maker will find someone dumb enough to take it over. That’s the bottom feeder principle, and unfortunately there are folks in the real estate world who operate on the greater fool theory. Be aware of the sharks that feed on the bottom.

Ten Key Factors For Evaluating Debbie Or Dan Has-A-Deal:

√ Someone who is honest

√ Someone who is knowledgeable

√ Someone who'll work their tail off for you

√ Someone who is committed

√ Someone who is creative

√ Someone who will do what they say they are going to do

√ Someone who will be able to return your money plus get a return on it

√ Someone who understands real estate law

√ Someone who has business sense

√ Someone who has the ability to bail you out if you need it

Lenders - Investors - Partners - Chapter J