Private Money Partnering

Kinds Of Returns And Rewards

Chapter N.

The Costs Of Money Vary
Bigger Risks Deserve Bigger Rewards
Partner Goals Reflected In Negotiated Agreements
Make Adjustments When Necessary
Don't Be Greedy

Forms:
Who Gets What - Dividing Up The Benefits

Structuring A Deal With Financially Different Component Parts

Whenever possible, Dan or Debbie should try to fund a deal by analyzing the component parts, funding each of the components in the least expensive way, and thus getting the least expensive overall cost. That will preserve the greatest possible rewards for the project and for themselves. What if the project costs $45,000 to
fund, and your regular Money Man, for whatever reason, can only put up $30,000 on a quick basis? You fund the whole project using his $30,000 and someone else's $15,000. It might cost you a higher rate of return for that last $1 5,000, but at least you get the quick deal handled rather than lose it.

That's the power of thinking in component parts. Everything is entities and pieces of things, and if you need to, replace one portion of the funding for the deal. Thinking in terms of component parts will make you stronger. Obviously it's easier to do something with just one person but sometimes it might be necessary to do a Joe and a Carol. It could be hard to work with a married couple acting as your money funds, because sometimes husbands and wives do not have the same goals.

There is no one way to look at things. Sometimes you need to go outside your usual way of thinking to come up with a solution. Sometimes you need to see things from a larger perspective in order to find the answer to a problem. Your creativity then can just go to town.

Bigger Risks Deserve Bigger Rewards

Let's look at how this is illustrated through a deal on Lee Circle, where I actually replaced one set of partners with another set. The property was a loan assumption that needed a bit of fix up.

DEAL	INITIAL PARTNER	ONGOING $COST	FINAL SPLIT
"2 DIFFERENT PARTNERS AT DIFFERENT RISK LEVELS" Lee Circle #1	$8,200.00	(inc. 2K up front & repairs)	was to be split 50/50, but replaced after 6 months
Lee Circle #2	$10,000.00	MC covers all costs	@ 13%, $1 1,300 in one year, but completed in 6 months so 26% ROR MC got 2K up front + $6600 final

I was pretty sure we could get it fixed up and sold on a lease-purchase, with everything to be completed within six to nine months. I collected $8,200 from my partners, which included $2,000 up front money for me. We were going to split the final profits 50/50.

The house was fixed quickly and we got a good lease-purchase tenant who could close within another four months. However, one month later, my partners found a commercial building they wanted to buy and they needed all their available cash. They had partnered with me on three other deals so I wanted to help them if possible. I found another set of partners, asked for $10,000, returned the original partners' $8,200, pocketed the difference, and structured a partner reward for the second partners that was different from the original 50/50.

Kinds of Returns and Rewards - Chapter N (continued)