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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Allocation of Profit and Risk to Investors Posted by Sean Wagle on April 10, 2002 at 11:05 PM Considering that a foreclosure deal takes several months for the "ringleader" to bring it from purchase to resale, how would investor profit be fairly allocated, considering that each deal could have a different percentage of investor money as available? For example, in a deal with 90% of your own money, and 10% from a passive investor, it would seem reasonably fair to just split the profit 90/10. But if it was the other way around, then you wouldn't want to do all the heavy lifting for only 10%, and hand off 90% just for "backing". (And it probably wouldn't be worth the time and effort for such a small slice.) I had a relative invest in a rehab business that promised 20% returns. The market slowed, the business owner stopped paying, and she had to put liens on him. She did get payed back, after a while, so at least it wasn't a scam or a sad story in the end. But it makes me think the best way to do deals is by percentage share of the risk. Promising anyone a fixed return is unrealistic, because of all the uncertainties of the game. Have you had to face your investors and say "Sorry, we lost on this one. Wanna try again?" Follow Ups: Profit allocation Ward-CA- 7:43 AM, 04/11/02 (0) Profit allocation Ward-CA- 7:36 AM, 04/11/02 (0) Post a Followup: Name : E-Mail : Subject : Comments: : Considering that a foreclosure deal takes several months for the "ringleader" to bring it from purchase to resale, how would investor profit be fairly allocated, considering that each deal could have a different percentage of investor money as available? : For example, in a deal with 90% of your own money, and 10% from a passive investor, it would seem reasonably fair to just split the profit 90/10. : But if it was the other way around, then you wouldn't want to do all the heavy lifting for only 10%, and hand off 90% just for "backing". (And it probably wouldn't be worth the time and effort for such a small slice.) : I had a relative invest in a rehab business that promised 20% returns. The market slowed, the business owner stopped paying, and she had to put liens on him. She did get payed back, after a while, so at least it wasn't a scam or a sad story in the end. : But it makes me think the best way to do deals is by percentage share of the risk. Promising anyone a fixed return is unrealistic, because of all the uncertainties of the game. Have you had to face your investors and say "Sorry, we lost on this one. Wanna try again?" Optional Link URL: Link Title: Optional Image URL: [ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] WWWAdmin 2.0a © 1997 Matt Wright and DBasics Software Company, All Rights Reserved

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