How do we decide the share when parternering to do flip? One will do all the work.
Member since 2018 · 89 posts · 26 votes
How do we decide the share when parternering to do flip? One will do all the work.
4 Replies
- 3yRyahn ToolePro MemberMember since 2022 · 6 posts · 1 vote
Quote from @Lilly Fang:
In our area, most of the fix uppers are cash only, (usually 300k to 400k) and needs more cash to renovate. I only have about 200k cash to spend comfortably and don't want to take a hard money loan. One of my close friends would like to team up with me. However, she is 2 hours away from our targeted area where I live. Basically, I will do all the work (research, look at houses, hire people to do the renovation, apply permits, etc), and she will just contribute some cash (probably 50-60%). How do we decide the share? What's a fair formula?
I haven't done this myself yet, but I'm in beginning talks with someone now. I've seen a lot of people talking about person A getting a partner, person B, to put up all the money. Person A does all the work and they split 50/50. Since you would be putting up half the money and doing all the work, maybe something like 75/25 makes sense. Just my thinking.
I'm interested to hear how it goes for you.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
Quote from @Lilly Fang:
In our area, most of the fix uppers are cash only, (usually 300k to 400k) and needs more cash to renovate. I only have about 200k cash to spend comfortably and don't want to take a hard money loan. One of my close friends would like to team up with me. However, she is 2 hours away from our targeted area where I live. Basically, I will do all the work (research, look at houses, hire people to do the renovation, apply permits, etc), and she will just contribute some cash (probably 50-60%). How do we decide the share? What's a fair formula?
My first recommendation is to just have your friend give you a loan that pays a specific interest rate. That is easiest and cleanest
My recommendation for people who look to do JV deals to avoid any bias if the deal goes really good or bad is to do the following:
1. The person doing the work gets paid a flat fee. Determine what you think is fair to find and manage the asset.
2. The investors (which are both of you) allocate profits based on investment amount.
This way if there is a disagreement, it is pretty black and white.
7e investments53 Reviews - Member since 2018 · 89 posts · 26 votes3y
Quote from @Chris Seveney:
Quote from @Lilly Fang:
In our area, most of the fix uppers are cash only, (usually 300k to 400k) and needs more cash to renovate. I only have about 200k cash to spend comfortably and don't want to take a hard money loan. One of my close friends would like to team up with me. However, she is 2 hours away from our targeted area where I live. Basically, I will do all the work (research, look at houses, hire people to do the renovation, apply permits, etc), and she will just contribute some cash (probably 50-60%). How do we decide the share? What's a fair formula?
My first recommendation is to just have your friend give you a loan that pays a specific interest rate. That is easiest and cleanest
My recommendation for people who look to do JV deals to avoid any bias if the deal goes really good or bad is to do the following:
1. The person doing the work gets paid a flat fee. Determine what you think is fair to find and manage the asset.
2. The investors (which are both of you) allocate profits based on investment amount.
This way if there is a disagreement, it is pretty black and white.
Yes, that sounds right too. I will ask her to see if she would just loan me the money for better than bank interest.
- Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes3y
Your first problem, is if she knows anything about money. She can get 5% guaranteed by the government. So she should ask for at least 8-10%. Which means you should borrow from a bank.
With bank rates so close to mortgage rates I struggle to come up with a deal that I would be happy with on either side. My first thought was a guaranteed 5-6% plus 10-20% of the profit but then you should go with a bank. But I don’t think I’d take any less as the lender. Would you? If she asked you to invest in her flip would you take less than 5-6% plus 10-20%.
I guess that’s a good starting point. How much more than a safe 5% would you require to invest in your friends flip? What’s the plan if you lose $20-$50k? Can you afford that and still pay her back? Can she afford not being paid back? Would you still be friends?
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