Buying & Selling Real Estate Discussion

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Aris Alexiou
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Joint Venture with builder. 50/50 but I put all the cash, fair?

Posted Jan 18 2022, 13:42

Hey guys,

I talked with a builder earlier today about my desire to have him built some duplexes for me. I have around 350k liquid ready to deploy for buying land and securing a construction loan. He told me that he prefers to partner up on something like this and instead of charging a fee, he wants to have equity. It was an informal conversation (nothing on paper, we agreed all this is going to be done thru LLCs and Joint Venture agreement with everything spelled out but we haven't gotten there yet), but from what I understood, he wanted to be 50/50 partners when all is said an done.

He mentioned it was going to be about $125/sqft to build at cost, no fees, and when I asked how much would it be if he was charging me a fee, he said approx. $190/sqft.

I would be putting all the cash (as I understand) to buy the land and secure us a construction loan. Does that 50/50 sound fair? Wouldn't the actual fair deal be more like the following:

Total Project Cost: Land Cost + Construction Cost + Fee

If I am putting all the Land Cost + Construction Cost then I need to have equity equal to the percentage of those 2. If per the numbers I gave the above, his fee is around 35% of the cost to build / sqft then he should have 35% - Land Cost in equity.

Thoughts? Sorry my for me syntax, English is my second language.

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