My buddy and I are about to start flipping some properties. He is a GC and would be doing/ subbing the work. My question is what would be a good split for investment and ROI? I would be covering more / all of the down payment, while he would be buying materials and covering labor costs. I was thinking about a few different scenarios.
After house is ready to sell, what are some good ROI options for me?
Initial investment paid back + ROI% + % of profits?
Initial investment paid back + % of profits?
Initial investment paid back + ROI%?
Initial investment paid back + flat rate?
Depending on the scenario, I could make more on some properties and he could make more on others (while I get my payback too).
My idea behind this is that I have more cash into the property, but he would pay for materials and labor, so we would both have a decent stake in the investment. I will have more hard cash into the property.
Any suggestions would be greatly appreciated.
Sounds like you can't do it without him and he can't do it without you. 50/50 split of profits?
From your position I think I would be happy with 50% of he profits. Since he is also investing capital but also his time doing and managing the project I would argue that he has more invested then yourself.
Also don't get caught up on the ROI% and % profits, I feel they are one in the same. Your ROI is going to be the profits from the flip. If your looking to get a percentage return on your funds(like a bank does) and also get a split of the profits, sounds like your looking to double dip.
I agree with @erik schilling and @sam ericson, a 50/50 split seems equitable, particularly if your GC partner is fronting the money for materials and labor along the way. If one or the other of you were to subsidize the other partner financially during the process, you may consider a split more favorable to whomever is fronting the most money.
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