Asked to consult for a private individual
Hi, would like to get your input on this.
My background is in real estate acquisitions, and I have been in this role for the past 9 years. I work for a company (institutional investor) that acquires and operates multi-family properties. A tennis acquaintance of mine (wouldn't consider us friends, but see him here and there) has always have interest in learning in that space and he has mentioned to me that he would like to start learning more and eventually would like to build a multi-family portfolio. By no means he's going for insitutional grade assets, but more like small 10-30 units building. He told me he wants to learn more first and is willing to comp for my time. I assume eventually, he would want me to consult on a deal by deal basis if he has a deal he wants to go for. I was wondering if anyone had done this before? How would you structure your fees? Hourly? Flat rate on a deal by deal basis? Any input would be appreciated. Thank you.
How much time/effort does it involve? Maybe you just ask for a small piece of equity on each deal?
The issue is that charging hourly brings in a lot of complications around how much time you actually spend, how you bill it, and probably involves a lot of arguing over whether your acquaintance is really getting his money's worth. Charging a flat fee means you may get suckered into spending way more time than you're being compensated for. Ownership at least aligns incentives, and since you're a real estate professional you can also likely take advantage of any depreciation, which is a huge bonus
If he's an active W2 real estate employee, this would not allow him to qualify as a "real estate professional" and take depreciation against active income; however, he could certainly take it against passive income to the extent he has it...
Thats a good point. I feel he's not willing to give a piece unless I'm willing to put equity. As of right now, I think he wants to learn a bit more about how the whole process goes, and he's willing to put in his own work first (find deal, run his own model) and ask for my feedback. Given that, you think an hourly make sense?
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