I am going to a few investors clubs in the US and I got approached by a person offering me a deal (buying a property that rent rooms) that will provide $3K monthly net cash flow. He initially called it - "let's partner", but then he asked for a "finders fee". Which I am not against providing if the deal is good.

However, I am not sure how that works, and how to recognize a good deal from a scam.

When he initially represented him as a partner looking for a co-owner, I thought is nice because the risk was split as well. While listening to the pitch most of the risk will fall on me.

Any thoughts?

  1. "A Person"? That's a remarkable credential. He must know what he's doing. Seriously, what are his credentials? When someone I don't know offers me a deal, any deal, I assume I'm about to be ripped off and walk the other way.
  2. "$3K net cash flow" - One time deal? That's typically called a profit, cash flow is monthly. What does he propose that you must put up, and what is the investment?
  3. It's a cliche, I know, but you should never invest in anything you can't explain to a smart 14 year old. If you are not sure how a deal works, then I am sure you should walk.
  4. You are a small investor, no offense, why does he need you?

You've actually provided no details here. But if you were a nearby friend, I'd buy you a beer or three, and talk you out of this.

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    Yeah, I'd say run, don't walk, away. I've never heard of a "finder's fee" in this context. If the guy was a real estate agent or business broker, he'd be getting a commission from the seller, not the buyer. That's how it usually works. – Rick Goldstein Aug 30 '13 at 18:26

Its a scam... Based on what youve said, i can guess what the pitch was...

"We know real estate realllly well and we are always looking for people like yourself.

"Would you like to make millions like us investing in real estate?

"We have totally optimized or leveraged our capabilities and so we will partner w you...

"Buy this house using your credit and then deed it to our buddy here and yourself. We will share the cash flow and you can pay us through this investment for what were teaching you...."

renting out separate rooms in a house you don't live in is sometimes fraud depending on your loan, but always really scraping the bottom of the barrel for quality of tenants. Save your money and buy a real place, with separate units.

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