Who's being the jerk in this financial situation?

[DrDeth]

@Anaamika

How has he been coy? From the OP:

“Thing is, my cash is tied up right now, and time’s a factor if I want to buy it. If y’all each invest X thousand dollars, I can give you a 20% return in about 12 months.”"

Jerry’s a jerk.

This question has been asked quite a few times.

See post #2 *"IANAL, but just from reading what you wrote, Sandra delivered what she promised on your investment. Was there any contract signed where it would be no more than 20% return, or at least a 20% return? *

#8 *1. Was anything written down?

2. Was the 20% guaranteed - if the flip had lost money, would she still have given you your investent + 20% profit?

3. Did she specifically say 20%, or did she say something like “about 20%, depending on how much I can sell it for?”*

Post 19, *These are the key questions. OP’s phrasing is “I can give you 20% return in about 12 months”. That is extremely vague, especially if nothing was written down.

I think there are two basic ways this type of deal could have been structured:

1. Fixed-interest short-term loan. In this case 20% over 12 months. Once you get repaid the loan is satisfied and Jerry is a jerk deserving of whatever punishment you deem appropriate.

2. Equity stake in the flip. You purchased Z% of the home with your stake (Jerry did the same). You are entitled to Z% of the sale price minus expenses, including reasonable expenses for Sandra’s time. This type of thing would require quite a bit more bookkeeping to sort out and settle, and is not something you’d want to go in on with a family member on verbal contract alone.*

#28 "*I’m going to go against the grain here because it’s not clear to me from Skald’s story whether the X thousand dollars provided was a loan or an equity investment.

If Sandra had said, “loan me X thousand and I’ll pay you back with a 20% return,” then fine. But if Sandra said, “give me X an thousand investment and I can probably make a 20% return on the project,” then all partners should share in the profit proportionally to their investment.

The wording in the OP makes it very ambiguous about which situation actually occurred. Which makes me think that Jerry and Sandra perhaps had a difference of opinion about the nature of the investment.*

#33 “People have been asking that question since the 7th reply, but apparently Skald would rather trade clever quips with his mutual admiration society instead of answering relevant questions.”

etc.

If it’s an* investment*, then it’s a loss chance and a % of the equity. If it’s a loan, then it’s a small risk fixed %.

In the Op, Skald said “investment”.

I honestly think that she said “investment” and “20%” return (mixing metaphors, so to speak) but meant “risky loan with a high pay out”, but Jerry fixated on “investment” while Skald treated it as a simple loan.

[Skald_the_Rhymer]

@DrDeth

Well, no, you have been rather coy about this “my understanding” , etc. Did the contract spell out a fixed 20% return or a % of the profit?

I.answered that several posts back. I didn’t and immediately when muldoonthief asked because I wanted to refresh my memory , and I don’t walk around with either contracts or bathwater in my pockets.

[muldoonthief]

@DrDeth

If it’s an* investment*, then it’s a loss chance and a % of the equity. If it’s a loan, then it’s a small risk fixed %.

In the Op, Skald said “investment”.

I honestly think that she said “investment” and “20%” return (mixing metaphors, so to speak) but meant “risky loan with a high pay out”, but Jerry fixated on “investment” while Skald treated it as a simple loan.

He did answer it in post 34 - it was a loan with a promised 20% return, regardless of the final profit or loss on the house :

@Skald_the_Rhymer

My understanding from. The get-gi was that Sandra was planning to pay us all back the 120% she promised regardless of whether the deal was ultimately profitable for her. But I wanted to read the deal over again first to be sure. (That was the agreement, by the ye way.). As I wrote up thread, I owe Sandra enough favors that I’d have been willing to do it as a zero-interest loan.

[Skald_the_Rhymer]

Where I answered before;

@Skald_the_Rhymer

My understanding from. The get-gi was that Sandra was planning to pay us all back the 120% she promised regardless of whether the deal was ultimately profitable for her. But I wanted to read the deal over again first to be sure. (That was the agreement, by the ye way.). As I wrote up thread, I owe Sandra enough favors that I’d have been willing to do it as a zero-interest loan.

[Johanna]

I’m going to make the chess pie with brown sugar and enjoy it while contemplating my Sicilian fegatello fianchetto.

[sleestak]

@Dogzilla

I think 20% is a pretty good ROI, especially in 9 months, rather than the promised 12.

If you can consistently get a 20% return every 9 months, you will be richer than god in a short period of time. 20% in 9 months is outstanding.

Slee

[Dewey_Finn]

The mention of nine months was incorrect. He later said the promise was for 18 months, but the money was returned after fifteen months. That’s still a great return for such a short time. (I’m getting far less than one percent on bank savings.)

[Yllaria]

@Skald_the_Rhymer

There WAS a written contract. Basically a promissory note.

OK. A loan and only an investment in the loosest possible way. Jerry needs to see that his glass is now 70% full.

[txswimdad]

@Isosleepy

This is much like this guy I used to know, who paid to have certain scrap metal removed from his business. It took me months to get him comfortable with the idea that I could get him a deal where he’d get paid for the material instead. He went from having to pay 2k/month to receiving about 24k/month *, and was quite pleased. Until he found out that my company was making a comission on the deal, which he just couldn’t deal with (not sure what he was expecting there). Some people cannot help but look in your wallet, and those people are best avoided. I held him to our 18 month contract (to which I had committed on the other side of the deal), after which I wished him good luck doing a direct deal, and goodbye. He’s been calling me recently, but it’s not worth taking the call.

(*details tweaked to preserve some shred of anonimity, gist is unchanged)

Many years ago, I worked for a chemical company that was buying a chemical compound from another company, mixing it in our product, and selling the end product to other companies.

The company making the chemical got greedy because of the quantity of chemical we were buying and raised the price dramatically. Try as we might to get them to lower their price, they refused. We told them if they didn’t lower their price, we would build our own plant to produce the chemical. They said they didn’t believe us; we called their bluff. Within one year, the new plant had paid for itself and was profitable.

Just about a year and a half after the new plant had gone online, it was shut down and we were again buying the chemical from the original company. Why? Because the chemical we were buying from them was a waste by-product from their production process. In the absence of our company buying it from them, they had to pay someone else to get rid of it.

[BigT]

@Skald_the_Rhymer

Where I answered before;

To be fair, that wasn’t the clearest way to word that. I’m still not sure what a “get-gi” is (and Google doesn’t help), and “get-go” doesn’t seem to fit.

Only context made me read it as “the original agreement.”

[Skald_the_Rhymer]

@BigT

To be fair, that wasn’t the clearest way to word that. I’m still not sure what a “get-gi” is (and Google doesn’t help), and “get-go” doesn’t seem to fit.

Only context made me read it as “the original agreement.”

Get-gi is a typo for get-go. And in typing the previous sentence, I discovered that my phone autocorrects " get-go" to “get-go” unless I notice and override, which I did not do before.

[bienville]

I’m a bit peeved that we haven’t heard more about the hot strawberry blonde sidekick. Pics would be nice. A phone # even better.

[Leaper]

@txswimdad

Many years ago, I worked for a chemical company that was buying a chemical compound from another company, mixing it in our product, and selling the end product to other companies.

The company making the chemical got greedy because of the quantity of chemical we were buying and raised the price dramatically. Try as we might to get them to lower their price, they refused. We told them if they didn’t lower their price, we would build our own plant to produce the chemical. They said they didn’t believe us; we called their bluff. Within one year, the new plant had paid for itself and was profitable.

Just about a year and a half after the new plant had gone online, it was shut down and we were again buying the chemical from the original company. Why? Because the chemical we were buying from them was a waste by-product from their production process. In the absence of our company buying it from them, they had to pay someone else to get rid of it.

Wait… The company gave up a profit center to retake an expense that was already shed? What am I not getting?

[DCnDC]

@Leaper

Wait… The company gave up a profit center to retake an expense that was already shed? What am I not getting?

WAG despite the profit, it still cost Company A more to produce the chemical than they could purchase it from Company B once Company B realized it was costing them money to NOT sell it to Company A, and gave in to Company A’s reduced price.

[ElvisL1ves]

@Leaper

What am I not getting?

That business decisions are often based on emotion and guesses rather than economic analysis.

[Gary_T]

@Skald_the_Rhymer

My understanding from. The get-gi was that…

@BigT

To be fair, that wasn’t the clearest way to word that. I’m still not sure what a “get-gi” is (and Google doesn’t help), and “get-go” doesn’t seem to fit.

It fits if both the spelling and the punctuation are corrected: “My understanding from the get-go was that…”

[Gary_T]

@DCnDC

WAG despite the profit, it still cost Company A more to produce the chemical than they could purchase it from Company B once Company B realized it was costing them money to NOT sell it to Company A, and gave in to Company A’s reduced price.

Yeah. Company B would have learned that they’d be better off even providing the stuff free to someone who wanted it than they were paying to dispose of it. Shot themselves right in the foot, I’d say.

[D_Odds]

@Hari_Seldon

+1

If you share the risk, you should share the return. If not, not. Not enough info to make a judgment.

Not necessarily. It could be a loan secured by the equity in the home, but nonetheless strictly debt. I would write up the contract as debt with contingencies for an extension in case of difficulties selling or refinancing. Personally, I would also write in quarterly interest payments (payments make debt investors less jittery; equity partners usually know better). But I don’t do anything without a written contract spelling out as many contingencies as everyone I ever worked with ever thought up or encountered.

While I understand not posting a contract in the OP, I read it as:

1. You will loan $x
2. Within 18 months, I will repay you $x * 120%

Even if verbal, that’s a straight debt deal. You could read more into the deal, but what was in the OP (and clarified with regards to the term of the loan) and without reading between the lines, Jerry should happily take his cut and Skald should send me a PM on the next fix & flip.

[Mama_Zappa]

Sandra is in the right.

Now, if she hopes to borrow from family again in the future, she might want to give the investors a small bonus just to be nice. But really, her sweat equity, supervising the workmen etc. is worth a LOT. Without that, the deal wouldn’t have happened at all, or it would not have made a profit.

Jerry’s an ass.

[txswimdad]

@DCnDC

WAG despite the profit, it still cost Company A more to produce the chemical than they could purchase it from Company B once Company B realized it was costing them money to NOT sell it to Company A, and gave in to Company A’s reduced price.

This is correct. Sorry for not being perfectly clear.

@Gary_T

Yeah. Company B would have learned that they’d be better off even providing the stuff free to someone who wanted it than they were paying to dispose of it. Shot themselves right in the foot, I’d say.

Yeah, in the end they slashed their price and begged us to start buying the stuff again.

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