Have you heard of the profit sharing model? Many people ask me what this new business model looks like. Once they learn…they wonder how they can adapt a version for their business.
The stereotypical model of “Buy low, sell high” isn’t complete any longer. Just like when Nobel Prize winner John Nash rewrote Adam Smith’s classical economic theory regarding social competition, profit sharing is rewriting the thought process behind how to best perform real estate transactions.
Here’s what it looks like in my company, a real estate flipping business aptly named “ProfitShare.” ProfitShare, buys homes, renovates them and resells them for a profit. What makes it different is that we share some of our profits with the original seller. As an example, we currently have a house on the market that we bought for $180K, put approximately $45K into the remodel and we have it on the market for $285K. After the closing for the sale, we will send the previous owner a check for $2K. They told us that they chose our offer other several others for two reasons:
(1) We are ethical investors and they could tell after talking with us that we were sincere and honest.
(2) We were willing to offer them the most of their house (after including the profit share portion of their proceeds).
Another example is one where the seller decided not to wait until after the remodel and resale of the house but instead decided to take a discounted profit share at the time of purchase. In other words, they decided to cash in at a discount and receive their money. This seller had the same motivations to work with ProfitShare as the other seller. We sincerely wanted to help them and share in the profits while treating them personally and professionally.
The net result is the same, these sellers chose our company over the competitors because we were willing to share. It seems so simple, even a kindergartener is taught to share, not to throw sand and play nice with others. Why don’t we do the same? What works in the sandbox, has created a windfall for our company and it might help you and your customers as well. Look for ways that you can help others and you will likely help yourself as well.”
ABOUT BRIAN PEAVEY:
Brian Peavey is the CEO of ProfitShare, a Boise-based real estate company company that buys, renovates, and resells homes…and then shares the profit with owners. Brian grew up in Boise, Idaho since 1976 and has over 22 years in real estate, first as a Realtor and then transitioning to work in development, remodeling and property management. His daily responsibilities are to track real estate trends in the industry as well as local market activity, identify viable market opportunities, analyze project projections, track remodel progress, market properties for sale, negotiate contracts, safeguard expedited and cost effective closings, and ensure partner satisfaction.