Assalamu’alukum,
I found an extremely experienced real estate developer (Manager) to partner-up with in the States; a true mentor in the real estate field. This is how the partnership works:
1- I open a business account & fund it; remain in full-control of the account
2- I give him management access to the account
3- He invests my funds in a vetted property - cash buy-out
4- Works with his trusted vendors/developers for rehab
5- After rehab, sells the prop to his vendors/developers at market price*
6- Sales proceeds are divided 50/50 between investor (myself) & manager (guy managing my account)
So far so good…
*Now, for #5 he calculates the sale price be around fair market price, using primarily these factors:
—Fee in Points
- Fixed percentage of total funds invested. E.g. 6% of $100k investment
—Duration Fee prorate: if over 120 days
- Charged daily if deal goes over 120 days, to keep vendors/developers inline with the promised schedule. They get penalized for going over the 120 day-mark.
—Interest Rate (arghhh)
- Fixed percentage of funds, as they are pumped into the project. E.g. 12% on $100k purchase prices on Day1 + $35k rehab fund from Day15, until whenever the property sales.
- This is the frustrating bit; just the use of word “interest” gives me a chest pain. I’m fully funding the project, manager will manage end-to-end buy, rehab & sale process directly to his vendors/developers, vendors/developers are given a schedule which essentially spells out how much they end up paying at the end of deal.
Question: Is this really interest? Or a partnership where the end cost is dictated by the fair market price of the property? This is so frustrating how one can’t get involved anywhere without touching riba!