Questions about adding a money partner - Joint Venture

[Chris T.]

I have a hard money lender in place already but haven't had the cash to go out an start buying. Especially considering listed properties take $1,500 deposits and rehab costs come out of pocket.

I have a money partner now who will put up all the cash for rehabs, holding costs, closing costs, deposits etc.... I will provide the deals and the financing.

My partner will recoup his cash on sale and we will split remaining profit 50/50.

What is the best way to setup this business model? Our exit strategy will primarily be carrying the note but we will also wholesale and retail some.

FYI - I'm going through a divorce.

[Justin S.]

Chris

I run a similar model and structure as follows:

1. I hold title
2. I get a HM loan for 1st position.
3. My JV Partner holds a 2nd position DOT along with a signed JV agreement showing the profit split and our duties.

Upon closing both DOT's are paid off and I send a profit check to the JV partner after all expenses are known.

Some side notes:

Check with your HML to ensure recording a 2nd DOT is okay. Some are okay with it and some are not.

I typically have 50% of my money in the deal to make both the 1st and 2nd position lien holders happy. They both want to see my skin in the property.