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What to pay a bird dog?

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  • What to pay a bird dog?

    Just trying to guage what I should be paying my bird-dog as a result of an interesting deal that has landed across my desk this morning. I have worked with person for a number of years, and while we have been very quiet for a long time this deal was sent to me first.

    Generally I pay them a percentage of the projected profit upfront (it helps with their cashflow), granted I take the risk but it has worked well over time. The percentage has risen over time and is now a fair percent of the profit.

    The deal today is reasonably large and the profit is considerable.

    The question is this?

    Do I offer the bird-dog a percentage of the project? (free equity)

    Do I pay the usual commission (which will be a large payment)?

    Do I pay a higher than usual commission?

    They have shown a skill for finding a deal which is incredible and I want to reward them accordingly. Any thoughts would be greatly appreciated.

  • #2
    How about paying them whatever the 'agreed' percentage is now, with a promise of a 'bonus' when the full profit is realised.
    DFTBA

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    • #3
      I think you should ask your bird-dog what they think a fair solution would be.

      99% of the time you will get a good, sensible, fair result and at the same time you will enhance your relationship with that person.

      If they put a silly offer forward then you will
      a) Learn something about the person and
      b) Be back to square one - at least you gave them the chance.

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      • #4
        In discussing it so far the number that has come back is well below what is fair, my BD does not have the confidence to discuss a larger amount.

        Asking this a different way, if anyone acts as a bird dog would someone be happy to receive a piece of the pie as opposed to their cash upfront (or at least given the option to take it this way)?

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        • #5
          I personally would be happy to take a small upfront payment and then a profit share bonus at the back end.

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          • #6
            If I had the choice profit upfront. Unless it was a great deal , then you would need to convince me.

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            • #7
              Offer both on terms that suit you and let them choose which they want.

              Gerrard

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              • #8
                I love it when we discuss how much to pay a dog

                I have normally paid a flat fee, or a percentage of purchase price, which has been around the flat fee price anyway.

                However, I like the idea of paying a percentage of the profit. A fair pay for a fair days work, and a simple calculation. $5k fee for $35k equity is one example that springs to mind. The 35k equity that cost me $5 five years ago is now $100k. Money well spent.

                The Dog

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                • #9
                  Originally posted by Muffin View Post
                  Generally I pay them a percentage of the projected profit upfront (it helps with their cashflow), granted I take the risk but it has worked well over time. .
                  Do what you usually do.

                  People love things they can rely on.

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                  • #10
                    All,

                    Thanks for the guidance and thoughts, it has proved to be very useful. At coffee this morning the options were given...

                    (a) The usual fee, plus a flat bonus given the size and quality;
                    (b) A percentage of the entire deal which equated to about 107.5% of the usual fee and bonus;
                    (c) A combination of the two;

                    BD went for (b). He can see the upside of the deal and is comfortable with the risk and potential upside (and the concept of a free run at it is attractive).

                    Part of me is glad that this was the choice as it means that they are now more actively tied to the business and if they understand they are going to receive a portion of the equity (plus a small stipend) they are going to bring some of the more interesting deals to me first. Interesting to see the entrepreneurial spirit shine through.

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                    • #11
                      Excellent a win win then

                      Just a thought Muffin, but are you sure they aren't a member of the PT community? It just occurs if this had been a genuine negotiation rather than a bonus you might have laid your hand a bit too open.

                      David
                      New to property investing? See: Best PropertyTalk Threads for New and Old Investors And/Or:Propertytalk Wiki

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                      • #12
                        Certainly sure they are not (technology is not his strong suit).... But now getting paranoid... very paranoid... better check.... And who keeps watching me, I can see them but they won't show their face, I think they may be tapping my phone as well...

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                        • #13
                          Just thought I would check it out, I have for example looked at a property on trademe and exchanged emails with someone and then deduced from some of the things that a poster was saying on PT that they were talking about that particular property and they were the owner... If I had been geniunely interested the knowledge would have been useful as part of a negotiation, and if I didn't have a well refined sense of ethics I could have even tried fairly dirty tricks like trying to condition them via PT as a concerned and friendly outsider (ie Oh dear it sounds like that property is more hassle than its worth... and working down their confidence in the deal and the price)

                          Sorry its a nasty idea, but thats the curse of a creative mind.

                          David
                          New to property investing? See: Best PropertyTalk Threads for New and Old Investors And/Or:Propertytalk Wiki

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                          • #14
                            I occasionally get a small reward / bird dog fee for giving one of my management properties to an agent to list and sell.
                            One has to be careful that the Secret Commissions Act is not broken.
                            I always inform my client that I am being rewarded.

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