Chandler, AZ · Member since 2014 · 5 posts · 0 votes
Is it an attractive arrangement when a contractor would pay for all rehab costs (per investors plan) on a property an investor buys, to give first refusal option to contractor to buy the house at ARV minus the rehab costs?
This would give a definite buyer in the contractor who would now have "skin" in the game for refinancing from a bank. Original profit projections could still be made.
I have no cash reserves but want to start a portfolio. Am I missing anything about flipping practices?
Rental Property Investor · Chandler AZ and Sylvania, OH · Member since 2009 · 708 posts · 561 votes
8y
How are you planning on paying for the property to acquire it? Sounds like he is not in a better financial position than you. I'd be wary because of two things, what if things go sideways and now he has skin the in the game. Can you hire another contractor, are you liable in returning his cost and paying for his labor if that happens? The other is once he has the job locked down, he doesn't really have an incentive to fix it fast since there is no real reward at the end of it while you have to cover the carrying costs. He could drag this out for months while you are paying interest on hardmoney.
Chandler, AZ · Member since 2014 · 5 posts · 0 votes
8y
Sorry for not clearly stating that the option to contractor is not available until the investor puts the house on the market. Still looking for a win-win.