Structure Advice

4 Replies

Hi Folks looking for structure advice. I had originally planned to act as a hard money lender for a flipper I know. Turns out I found a property and negotiated good terms with the seller that would baulk if he knew someone else was involved. So I have the property under contract for 115k. My flipper is willing to do all rehab work for all profit over 10K, with provisions for interest for time after 6mos.

Should I buy the property and hire the flipper as a contractor or act as lender and have him take deed to the property?? Any and all advice appreciated.

Thanks

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What do you mean by "with provisions for interest for time after 6mos."

Also how much work is involved that it'll take 6 months to rehab the property?

I very much like the idea of taking $10k and giving the rest of the profit to the rehabber. It'll make him do his best as quickly as possible so he will maximize his profit. It's an ingenious idea!!

-Michael

After 6 mos. I get an extra 1% of his selling ARP price, after 12 that bumps to 2 %.

Work involved is alot of elbow grease, enclose carport to garage, some sheetrock work, ext. and int. paint, redo hardwood floors, kitchen cabinets refaced, and of course baths need some work. He is expecting 3-4 months for the work.

What I am really looking for is a way to step in and buy this house, and have him do all the work without actually having to "hire" him. We have a tenative agreement as outlined above, but as I started pondering the legalities I have come to the conclusion this was a little more complex.

He does great work, but is not a liscensed contractor (I've seen 2 other houses he's done). I imagine this has leagal and liability issues. I would then be reponsible for building permits and such. Not to mention w9' and 1099's.

Am I making this more complicated than it is? Barring these complexities I am actually very comfortable moving forward with this guy. But it occured to me it might just be a whole heck of a lot easier to wholesale it (and carry the paper) to him and let him handle all the hassles.

Well I sold this prooperty to my flipper for a quick 10K profit and agreed to carry the paper interst free for 6 mos. The contract included a 5% penalty for being late. They invested about 15K into rehabs. When default occured the penalty was added to the balance and I received 22K from them to avoid forclosure and extend the loan for an additional 12 mos. at 10%. Any critiques? I'm pretty happy, but curious if I should have done different?

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