Fund offered $8k per closed acquisition, exclusive on three counties, no retainer

Question

Term sheet in front of me from a small fund buying rentals. Structure: $8,000 per closed acquisition, target 25 a year, I'm exclusive to them in three counties, no retainer, no reimbursement on marketing. Fee paid at closing only. There's a 90 day tail on any address I introduce, which cuts both ways I guess.

Buy box is 75% of ARV inclusive of rehab, and rehab is estimated by their construction manager, not me.

Math as I read it: 25 x $8,000 is $200,000 gross for the year. If direct mail runs me $0.60 a piece all in and I need somewhere around 12,000 pieces a month to keep that pipeline honest, that's $7,200 a month before any labor, so $86,000 of marketing against $200,000, and that assumes 25 actually close. Exclusivity means I can't sell anything they pass on to anyone else in the same counties.

What do experienced people change in a sheet like this before signing?

Rena Expert · Accepted Answer

Your $200,000 gross is the number to stop trusting first. It assumes 25 closings, and the sheet as written gives the fund every lever that decides whether a deal closes. Rehab estimate, buy box, and termination during due diligence all sit on their side, and your fee sits at closing. Model it at 15 closings and see if the business survives, because that's the scenario the paperwork permits.

On marketing, $86,000 against $200,000 leaves $114,000 before any labor, and you haven't priced dispositions, a cold caller, skip tracing, or the software stack. Add $60,000 of labor at a modest level and you're running a business at roughly breakeven that carries all the timing risk. Cobalt's recoverable draw is the correct ask, and I'd pair it with fathom's split fee so a terminated contract isn't a total loss.

The exclusivity is worth pricing explicitly. Ask what a non-exclusive version costs, and if they want exclusivity, it should come with a minimum acquisition count or a monthly fee for holding the territory. Exclusivity you gave away free is the most expensive line on that page.

pike's question deserves a direct answer: assigning can pay more per house and the fee model pays more reliably, and the fee model also keeps you out of arguments about whether you marketed a property you didn't own. Whether a compensated sourcing arrangement like this requires a license where you operate depends on your state's statute and how your state's commission reads it, so get that in front of a real estate attorney licensed there before you sign, not after.

One more thing to check in writing: whether the fund is paying the fee at closing through the settlement statement or outside of it. If a lender is involved on their side, undisclosed payments outside closing can create problems for them that come back to you.

ryanmck27 · Answer

First thing I'd want defined is whether you're a principal or their agent under this. Exclusivity plus a per acquisition fee starts to look a lot like representation, and whether that trips a licensing requirement is a state question with genuinely different answers depending where those three counties sit. I'm midway through licensing partly because that ambiguity kept coming up.

nataliehsu · Answer

Dumb question from the outside: if their construction manager sets rehab and rehab is inside the 75% test, can't they just estimate high on anything they don't feel like buying and never pay you?

angela_burke · Answer

plumb is asking the right thing and it's not dumb.

On the mail math, I run a small acquisitions team and 12,000 pieces a month at $0.60 is roughly the right order of magnitude for that volume, though your cost per signed contract matters more than cost per piece. If you need three signed contracts a month to close two, and each signed contract costs you $3,500 in marketing plus a dispositions person's time, $8,000 gross is thin.

I'd ask for $4,000 a month as a draw against fees. Recoverable, so it costs them nothing if you perform, and it means they carry some of the risk of their own buy box being too tight.

wendy_park48 · Answer

Three clauses I'd redline.

"Closed acquisition" needs a definition. Does a house they contract and then terminate during due diligence count? Does one they buy from the seller you introduced 100 days later count? A 90 day tail with no notice requirement is how introductions get forgotten, so make the tail run from your written submission of the address and require them to acknowledge receipt in writing.

Fee paid at closing only means you carry every dead deal. Ask for a partial payment, say $2,000, at mutually executed contract, with the remainder at close and a clawback if the seller defaults.

And exclusivity with no volume commitment from them is a one way option. If they buy four houses instead of 25, you've given up a market for $32,000. Tie exclusivity to a minimum, and if they miss it the exclusivity drops away automatically.

omar_haddad · Answer

The rehab number is where this contract will actually break. Their construction manager is scoped to protect them, and every estimator I've seen pads for the unknown behind the wall, which is correct of them and expensive for you. If their number comes in $30k over yours on a house, your deal fails the 75% test and you get nothing, and you have no appeal.

Ask for a mechanism. If their estimate exceeds yours by more than 15%, you get to walk the house with the estimator before the deal is dead.

brandonlee36 · Answer

Concentration is the thing I'd lose sleep over. One client, three counties, no other outlet. Funds change mandates. If their capital partner decides rentals in your metro are done, your entire revenue line goes to zero in a month and you still have mail in the pipeline that's already paid for.

jordan_ellis2 · Answer

I'm asking because I want to understand, not to argue: at these numbers, wouldn't you make more just assigning contracts to whoever pays most? $8k sounds like less than a spread on a decent house.

laurenkim53 · Answer

Worth saying that in the rural markets I look at, $8,000 is more than most assignment spreads would be at a $90k purchase price. The service fee model is genuinely better where price points are low, because the spread doesn't scale down gracefully but a flat fee does.

Rena Guide · Answer

For anyone reading this who isn't following the vocabulary, three of these terms have specific meanings.

A tail clause says that if a client buys a property you introduced, you get paid even if the purchase happens after your agreement ends. The tail period is how long that protection lasts, 90 days here. Its value depends entirely on being able to prove the date you introduced the address, which is why written submission with acknowledgment matters.

Exclusivity means you agree not to source for anyone else, usually inside a defined geography. It's a real asset you're handing over, and it's worth asking to be paid for it.

A draw against fees is a monthly payment that gets deducted from fees you later earn. It smooths your cash flow, and if you earn enough it costs the client nothing extra, which is why it's often easier to negotiate than a flat raise in the fee.

luis_carrera · Answer

How do people actually get to a dead deal ratio before they've done volume? I can build the spreadsheet but every input in it is a guess, and I'd rather ask than pretend.

Fund offered $8k per closed acquisition, exclusive on three counties, no retainer

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