Thank you for posting your question. We appreciate newer members and having something to discuss.
I’m sure the smart, good looking members of this board are off earning a fortune. Since my tenants haven’t called my phone today I have some time to peck away at the keyboard.
You have good reason to worry about accepting a commission. Since it is contrary to law, I can’t see how it could be enforced in court. It’s odd that your friend wants to use this method. It might be best to bite the bullet and get licensed. I’ll skip the Civil Code citations.
The California Department of Real Estate, Reference Book – A Real Estate Guide
Chapter 1 The California Department of Real Estate
Page 2 “When a Real Estate License is Required”
“Without a license, an individual cannot receive compensation for the performance of any of the acts defined as being within the purview of a licensed broker or salesperson. In addition, the law provides penalties for a person who acts or purports to act as a real estate broker or salesperson without being duly licensed.”
I understand your need for secrecy, but you should make it clear that you can provide the following information to a prospective buyer”
The multi-unit dwelling is a multi-owner condominium development (with all the association overhead) OR rental apartments. It seems unlikely that a single owner would buy and occupy the entire property. (I assume you are not selling to individual condominium buyers, but who knows?)
A projected net profit if the building is flipped. You seem to be suggesting that the percent equity would get the same percent of net profit. Unexpected expenses or delays casing addition holding costs would lower this.
Your investor would probably want to know the CAP and ROI of the building as a rental, as this would be very important to the end buyer and heavily influence the purchase price.\
CAP = Net Operating Income/Price.
So buyers will often take the given NOI and their target CAP to figure out a fair price: Price = NOI/CAP.
Simply put Return On Investment is (NOI – (annual) Mortgage Payment)/Down Payment. This includes leverage and mortgage payment. ROI isn’t bigger than CAP until the annual mortgage payment/starting loan amount is greater than the CAP.
Include some weasel words to the effect that actual net profit, CAP and ROI could be less or more or none at all than the projected values.
In the end, you get value by giving value. Here’s to a long and successful career in real estate!