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Justin Marschalk
  • Rental Property Investor
  • Des Moines, IA
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Partnership for Live in Flip/BRRRR

Justin Marschalk
  • Rental Property Investor
  • Des Moines, IA
Posted Dec 14 2022, 05:46

I have a friend that has been running a small residential general contractor business in the Seattle area and will be moving to St. Louis, MO in March 2023 where we are both originally from. I no longer live in the area. He will be establishing his GC business there as well. We are looking at partnering on a single family home that he will live in while he does the majority of the remodel himself. Once we are able, we would hopefully be able to refinance and turn into a long term rental. Or would it make more sense for him to stay in that home and use the money we would get out of the refinance to do a traditional BRRRR on another property? One scenario we discussed would be for me to fund the rehab/his time doing the work and he will take care of down payment and the loan on the home. What are some ways we could structure this partnership and legally and fairly split ownership of the property? We are hoping to turn this into a long term partnership and invest together for years to come. I am planning on meeting with a local real estate attorney and CPA to discuss how to structure this as well, just looking for some thoughts on different strategies to approach this.

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Basit Siddiqi
Pro Member
  • Accountant
  • New York, NY
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Basit Siddiqi
Pro Member
  • Accountant
  • New York, NY
Replied Dec 22 2022, 22:13

I would avoid this idea and look for ways to make it simpler.

What is stopping him from staying in the property for longer while the renovation is 'nearing completion'
He benefits as hes staying in a property likely for free.
What is to stop him from saying that he should be the tenant after the renovation is completed - He will likely ask for a low rent with difficulties to increase rent in the future.

It seems like you have the money and he has the renovation experience.
I would just take your money, buy a property, and hire a contractor.
No need to make it more complicated with partnerships.