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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Profit allocation Posted by Ward-CA- on April 11, 2002 at 7:43 AM In Reply to: 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?" =•=•=•=•=•=•=•=•=•=•= Sean, in my deals investor monies get 50% of the profit. The other 50% stays with our company for its overhead expenses and profit share. In the case above, the 50% going to the investors would be split 90/10. But in all cases 50% of profit would go to the investor pool and split according to the % amount of cash contributed by the various investors in the pool. Follow Ups: 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?" : =•=•=•=•=•=•=•=•=•=•= : Sean, in my deals investor monies get 50% of the profit. The other 50% stays with our company for its overhead expenses and profit share. : In the case above, the 50% going to the investors would be split 90/10. But in all cases 50% of profit would go to the investor pool and split according to the % amount of cash contributed by the various investors in the pool. 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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