First Deal Working With a Partner
We have successfully flipped six properties in the Denver metro area in the last few years. This has been a part-time deal for us as we both work full time and have done most of our own work. Of course, that means that we hold the properties for several months, making our holding costs too high. Our new goal is to work more with contractors so we can turn properties more quickly. We'll see how hard it is for us to let go of the reins!
A colleague has offered to split a deal with us on the purchase of a SF property at below market value ($130,000). ARV is $235,000 - $240,000. Rehab costs will be around $40,000, so the profit margin is there. Here is how we are currently talking about structuring the deal:
Partners (colleague and his wife) put up $85,000 (interest free) toward initial purchase. (This is half of the rehabbed cost.)
We put up the remainder of the initial purchase ($45,000) and front the rehab costs.
Any work done by any one of the four of us will be calculated/paid at the going rate for that job, although most of the work will be performed by contractors. We will locate/furnish some of the contractors and the partner will do the same (based on what we already know about their quality of work as well as bids they submit).
The property will be held in our LLC name and we will execute a promissory note to the partner for the cash he put up as well as an agreement to split the profit 50/50 on sale.
What else should we be thinking about before we sign on the dotted line? Thanks!