Hey Gang,
I was approached to serve as a defacto analyst for a developer for a big project in the Tri-State area. I would be doing this for one project at a time with this company. My question is what is a reasonable amount to charge for this service? The role will be a contractor role 1099, but not sure if flat fee or hourly should work, also is carry a possibility?
Thanks for any insight as I know a lot of you have side gigs.
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CRE " NYCCRE prospie surferdude867 guys, any ideas? mrcheese321
Full disclosure, I don't have experience working 1099 for a developer, but I would definitely charge hourly. Think of it like an attorney fee: they usually provide an estimate (make sure it is uncapped) based on how many hours they think it will take to do a transaction - and as a courtesy they let you know when you reach the estimated amount. They still charge hourly, though, because they know it is almost impossible to estimate how much time they will have to invest in a deal, and their time is what they, and you, are selling.
I have been approached for gigs like this. I would have a minimum but would also size the fee based on the project size. Ideally I would roll it into a economic interest in the deal rather than getting paid cash.
What would you do for TPC of ~$100mm?
Not trying to hijack the thread. Are you being asked to secure $100MM in debt financing?
Is this a site gig as in addition to a full time job or would this be your main income source? If it is the former, make sure you clear it with your current firm, or make sure there are not inherent conflicts. If it's the later, I agree with Danielplainview (great movie) that you should charge hourly - and don't be bashful on how much. $40-$50 an hour for sure - maybe more depending on market. No one is going to give you % of the deal though.
Yes, it is a side gig, my guess is average of 10 hours a week.
My goal is to get a bonus upon securing debt financing, as that value I can add.
I know a few guys that have been given a % of the deal... doesn't hurt to ask.
As a 1099 analyst? What am I doing with my life
i did this recently. my more aggressive friends scolded me for not charging X thousand dollars for the whole job, telling me that by billing hourly i am screwing myself. But, i'm not sure if the 'client' would have been okay with that. they were known for being cheap assholes.
the same friends said if i HAD to go hourly to charge $125/hr for what i was doing, but that felt crazy high to me.
i doubt you'll get carry but you can ask. it has occurred to me that it would be fun to do something like this for a sliver of equity instead of cash.
I was thinking, I can come in and ask for 125-150 an hour, then say I'm ok to roll it in for .5% of the deal. Or give different structures, like give 3 options, hourly, project, or monthly.
Not to hijack but how does one go about securing a 1099 gig like this?
Networking. There are a surprising number of people looking to invest in RE that could not run a pro forma to save their lives.
Take the number what you think the job would be salaried, and divide by 2000. That will give you a base hourly rate. Tack on a premium to that to account for benefits.
For example, if you think doing a full time job like that you can earn $120k per year, divide by 2000 and you get a base $60 hourly rate. Bump it up a little bit to compensate for self-employment tax, health insurance, and the implied benefit of PTO. Then you end up with a rate near $70/hr.
It's kind of an eyeball figure... also factor in what you think they'd be willing to pay and how much stress it will be on you. If it's a deep pocketed client, then go high. If it's a cash strapped client but you really want the work, go lower. End goal is to get something that you feel good about.
Also, I'd recommend doing hourly and keep good notes on your timecard vs a fixed amount. That way you don't feel ripped off if it turns out to be harder or they tack on additional work.
Appreciate the feedback. Just thinking about this, wouldn't there be some point where you have 1-2 hours of work at 9pm, where you just think It is not worth $150 gross of my time?
Definitely. If the money you're getting is not worth the stress, don't do it until they pay you something you're happy with.
What I provided in my initial response gives you a fair baseline to work with, but as a consultant you can easily bill much higher than the salaried hourly rate and get away with it. I think the high hourly billing rate of consultants in some cases gives off a perception of prestige - shows that you can confidence in your own value. It all comes down to what the "market" (i.e. your client) is able and willing to pay. It's a poker game.
I've done this type of work and this is the worst way to compute your hourly rate. You should focus on the max you can get and not an equivalent annual salary, the poster is not taking into account the risk volatility of such types of jobs as opposed to a non-exempt annual salary. I personally never look at anything less than $200/hr but I have a lot of experience, if you're good and younger you should not even consider less than $125/hr anything less is a waste of your time and you're getting a** raped on comp.
Thanks for your comments. I like this way of looking at it. I occasionally do side gigs, and what you say here gives me the confidence to be more selective and charge quite a bit more.
By the way, what do you mean by risk volatility? I take it that you mean that a salaried rate is "discounted" because it's supposed to be a long term arrangement with built in "security"?
what kinds of work do you do? Like, what are people paying for; excel models, network of capital, dd on transactions.. can you add some color on what exactly people are paying for on side gigs?
I charge anywhere from $100 - $200 / hr for my consulting gigs. They involve building Excel models for large developments or acquisitions, often times from scratch. I work in a major metro.
Even at those rates I'm not moving the needle at all on their returns. If they want to pay someone $50/hr to do complex work then they can go ahead.
Ask $150 to $200 per hour as a consultant if you can be a strategic advisor to the developer! I have done this before. Do not settle for $70 per hour or a non-sense number. This isn't a salaried job!!
I did work for a broker in my market and charged $150 per hour and there was no argument about the rate. I wish I had asked for more!
Make sure you are a true consultant to the developer if you are charging $$$. For example, run two scenarios, go directly to a lender and see what costs will be. Also talk to a mortgage broker and see if they can provide you better terms. If you can show improved returns, ask for an incentive bonus for your work. Don't just be an analyst running numbers.
Deal was done at $150 an hour, with bonus for securing debt financing.
Thank you for all the help, everyone!!
Good work, man
So, I'm back. Anyone have any thoughts on how to structure the agreement? What protections should I add, and what are unreasonable for me to add.
Get a lawyer to draft an independent contractor agreement. Shouldn't cost you much. I would also get an umbrella E&O policy in case they try to sue you.
It’s basically an advisory/debt brokerage gig right? Maybe see what those contracts look like from your full time employer and copy that. No sense in hiring lawyers for the full job bc they’ll charge you out the ass, or in reinventing the wheel...
An ICA should only cost a couple hundred bucks to have drafted and OP will be able to sleep at night.
Make sure you add language into any studies you prepare that disclaim liability and state that the information presented represents a specific period in time subject to market changes.
I highly recommend Michael Zipursky's blog on consulting for pricing structure guidance. I have found that if I charge a flat fee I can get $500-$625/hour on CRE consulting work. If I charge hourly, it's hard for clients to stomach paying me more than $100/hour. Lot of pricing psychology at play there.
That being said, you almost have to screw yourself over the on the first few projects by tracking your hours and seeing what your hourly rate ends up being. It can be tricky to raise your rates on the same client for similar work afterwards, as well. I have received something like a dozen clients through referrals, so I have been able to increase my rates from client to client.
well, wish I knew this before.....
But HOPEFULLY, I'll apply it to the next one.
Any idea on how to track or bill hours, besides the ol' pen and paper?
For projects where I work hourly, I do keep an Excel spreadsheet with start and stop times and a brief note about what I worked on in that time-frame, in case I ever get questioned about the billing amount. From there, I send an invoice at the end of each month. I don't have any advice on tracking software beyond that - I prefer to keep it simple. I would advise you to track your time on the phone with the client, though - that can eat up a lot of your time if you're not careful, and having them know that you charge for that time helps them be succinct.
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