A guy I know needs to move but he has a criminal background and bad credit. I told him to let me find him a house and he has agreed to that. I came up with this idea to buy a house (in my name) and let him foot the bill and he said he would do that as well. He has around 10-15 to put down and i told him that we could do the deal as a partnership and when we flip the house we will split the profits. Can someone give me a little advice on how i should set this up. thanks and advance.
Need more info- Is the bad credit guy putting up all the cash? what is the total ALL IN price- equitation and rehab going to be? Keeping the house in your name is OK - I dont know about the splitting of profits part.
You can keep ownership and the amount that he contributes can be a first trust lien against the property to protect his interests.. Abouve all- write down what you two expect and what the plan is- and also what plan B is too- good luck
@Dee Peterson I don't mean to rain on your parade, but the guy has bad credit meaning he, more than likely, can't handle his own finances so what makes you think he can handle a business partnership?
I understand the desire to help people, but you should also consider the risks involved with helping such people. I'm not sure that I would invest my money or time in helping someone unless I knew for a fact it would be worthwhile or it's for charity.
I know the guy pretty well and he has a good job. His mother messed up his credit and I'm in the process of helping him get his credit fixed. I think this will be a good partner down the road due to his access to cash. I just don't know how to set up the deal. I was thinking charge him 20% down. I got approved for a loan last month with a 15% down payment. This would give a little security since I'm using my credit. Does this sound like a good deal. Thanks guy for all the advice.
I would not do it. I don't do business with friends or family. I definitely wouldn't want to do business with someone who has bad credit and criminal background.
"His mother messed up his credit" - how? Unless she stole his personal info and used it, how can anyone let someone mess up their credit.
What is his criminal charges? I know people *sometimes* change, but I don't like taking that chance when I have lots of $$ involved.
Just based on what little I've read, this guy doesn't make good decisions and makes excuses for them.
Brandon C. I hear you but I'm not putting money into the deal just using my credit to get the loan. If he doesn't pay his rent then the property will become mine free and clear It would be like someone gave you a rental or a flip on your 1st deal. So his credit and background aren't my problem.
Vetting your new 'partner' aside, I think the most I could do in a deal like this is buy the home in my name with his down payment funds (you'll have to somehow explain that to your lender- the source of the $) and offer him a lease with separate option to buy. Have his buy price and term length pre-established.
For example: You find a good property for fix and flip at $100k. He pays the buying costs and down payment totalling $28k. You turn and give him a lease that covers your payment plus a little extra, plus an exclusive option to buy from you at $120k for 12 months. (or whatever you decide). He sells the property for however much he can get. You get the small monthly cf plus $10k-ish profit after sales expenses and taxes. Don't forget the sales expenses and taxes! The $28k he has into the deal is his Option Consideration. If it doesn't work out, you can evict and get the house back. You can be more lenient on the next deal @Dee Peterson as you see he can perform. Good luck and keep us posted!
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