OfflineHello,
I recently did a deal where I had no earnest money. I went to someone and told him I would pay him back half the profits. I do not remember the exact words I used, but I know what my intent was 50% of the Net profits.
I intended to wholesale the deal for a substantial amount more than the earnest money expecting to give my partner a nice return on his investment. But I told him upfront he may lose his money if the deal couldn't be wholesaled.
I did end up wholesaling it for a nice amount. I paid back half of the profit I promised giving a return on investment of over 300%. He looked at me as if I'd given the wrong amount.
He expected to get half the profits plus his original earnest money back which was never what I intended. He even asked if I was kidding. I said no, but he couldn't understand. He looked at it more as loan. I intended it as more if an investment. I listened to him and totally understood his viewpoint. I told him mine in more detail and he seemed to not understand it because he believes that isn't the way it should be done. This was the first time I'd done this, so to appease the situation and show goodwill, I paid him back the initial earnest money even though that is never what I intended.
I believe he still is thinking I tried to do him out of the initial money and he feels I should have known better. He's apparently done this many times. I never had. What are your thought on this ? It appears I've lost a good relationship over this and I'm devastated. Thank you for any advice ahead of time.
I feel if somes goes in on a deal with anyone and puts up the earnest money, they should recieve the earnest money back and 50/50 split on the profit if that person funds the whole deal. You have to look at it this way, you would of not made anything is he didn't fund the deal. Something is better than nothing. You didn't no money in the deal and made a 27K profit, you should be a happy campper. If I was you I would try to patch things up with him because you might need him on a future deal.
Reynold Orozco
Am I really that far in left field?
Appreciate the opinions. Keep them coming.
need more opinions??!! as Karen says, just shake it off and move on to new deals; stop wasting your time and energy on negative thoughts. Put it behind you, lesson learned.
Many investors will advise you to borrow funds if you can, and do a joint venture; if you pay your partner back his EM and then split the profits 50/50, you will still get 50% of the profits that you would otherwise not be able to get.
I think that just about anyone here would rather do that than pass up on a deal because they would have to return the EM and then split the profits.
Valerie
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I can understand your thinking, but I don't necessarily agree with it. You think that since your private money lender made a huge return on his money, it's okay to keep a little more for yourself, right? If you want to keep that connection, you can't think of it like that! You both agreed to a 50/50 split of the profits, and you tried to take more. And as I've stated before, profits are after ALL expenses, and earnest money is an expense you forgot to include while calculating profits originally.
On the other side, do you understand our thinking? You seem committed to have at least one person agree with you, why is that so important? You have MULTIPLE seasoned investors on this thread telling you that you calculated the split wrong, so why is that so hard to accept? Take advice from qualified people, not from people who only tell you what you want to hear.
Remember, it's okay to mess up, especially when you're new, nobody is perfect! Just learn from your mistake like Val said and move on. No need to get so upset about making ~20k with no money down! Pat yourself on the back and work on your next deal!
Dominic
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But I guess I struggle with that my original intentions don't matter. I never figured because he's getting a great return I should get more. I always thought I was multiplying his money. I was looking at giving a great return and never looked at if as a loan or a lender. I guess I just want to hear that what I thought makes some sense. It was never about making more, it was that I want to see if its impossible to understand where I was originally coming from and that my intentions were sincere. I Never, ever was out to screw my partner out of money. I sincerely was giving him what I thought I agreed to pay him back with, thinking that giving him more than 3times what he put in was phenomenal. It wasn't concocted after the fact. I figured if I profited $32 which would have been almost impossible not to do, I would double his money and make him so happy. Anything more than that was a phenomenal bonus. I want to believe he doesn't think the worst of me, but from the responses here it seems my thinking is so different that he must have to think the worst of me.
When its calculated as a return on investment, I subtract the cost of the investment to calculate the return and the initial investment is returned within the calculation. The initial invest remains a cost. I won't bring it up again. But I sincerely just looked at it differently, not because it was an afterthought. But because it was what I always meant. It's my fault for thinking so differently.
I see a your points clearly. But I think I understand more clearly that he must have to think the worst of me.
To err is human, we ALL do it. I'd apologize, try to make it up to him and keep trying until you feel he forgives you and you're back in his good graces. Integrity in any business is VERY important. You can fix this! It only takes one bad referral to ruin someone's reputation! So ALWAYS admit your mistakes and make sure the other person knows you're truly sorry, then make it up to them. They will remember that more than the error!!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
You go girl dont feel stupid or too down on yiourself I live in So cal too in San Diego and have made hundreds of offers, burned thru almost who knows 80 agents! Had like 13 props under contract over the past 2yrs, was blocked on dg.com for who knows what n just now unblocked. You got a great deal, fell on your face but you got a great deal with a lot of $ now you can use your own emd you dont need him anymore and if he is a human being of any kind he w/realize you are a NEWBIE like me and we mess up! We dont have a coach holding our hand w/flew down here for 3 days etc we are learning on the fly, OMG how many mistakes Ive made.
You know I got it wrong in the beginning thinking I heard Matt larson say to use $1.00 emd for realtor prop's, didnt know he meant fsbo's, (i still got 5 props under contract, this w/2yrs ago w/the market w/diff). Shake it off you just made a lot of $, I love it, i just got my 1st deal a humble bird dog fee of $1,350 2 mo's ago, just got back from mexico to visit my wife(did i say my wife had to go to mexico she w/deported no papers-worst day of my life) so..
Sorry for the long post just hadnt shared on here(cuz i w/blocked)but also w/still recovering fr being blocked, sorry agian for the long post wnt to encourage you, we must move on, btw I do use $1k emd although I havent gotten a wholesale deal yet here, stay tuned & God bless all the dg fam, this thread encouraged me and made me laugh & want to lift up
Tony
Go faster do more! GFDM!