I have been in this business almost 3 months now,and I think this is deal I've been working has a lot of potential,
The owner does not need to sell but he decided he wants to partner up to rehab the house, and I was going to wholesale it before but now a RE investor/broker decided to fund the flip so I would like to know what you all think about this,you can it be legal structured. Thanks in advance. Here are the numbers.
(Homeowner)- will donate house to the project
ME-. will manage and provide GC, plans, permits,and overlook project.
INVESTOR PARTNER . will provide funding for rehab(repairs), market and sell property
costs of repairs 65k-85k
holding costs.( gas,insurance,taxes,electricity,water/sewer/trash)
realtor fees 6% -19,500.00
title-escrow fees - 979.00
total Selling costs - 21,683.00
Projected profit and split
projected sales price 325,000.00
less costs to repair/hold/sell 21,683.00
total profit - 303,347.00
projected profit split
Homeowner - 151,673.50
ME AND MY INVESTOR . - 151,673.50
Split between MY INVESTOR AND I
INVESTOR - 75% = 113,755.00 + 19,500 (Realtor fee) = 133,255
(after rehab funding) 48,255.00 - 68,255.00 depending on rehab costs
ME - 25% = 37,918.00
can something like this be structured? what other options do I have? I have been marketing to wholesale, but since the owner does not want or need to sell ( his house has been sitting for the past 5 years) should I go ahead and get this deal done if it can actually be done. thanks. im really new and would like an expert advice =)
If your numbers are correct, this seems to be a good deal. Your holding costs seems to be on the low end. It will not take you just one month to finish this project. Even if you finish it in one month, it will take you one more month to find a buyer and that buyer will take one more month to qualify for a loan. You have to factor in a minimum of 3 months of holding costs.
The way you should structure this is:
Property owner deeds the property into an LLC that is owned by YOU, your FUNDER and the property owner
The LLC ownership will be structured so that the property owner gets 50%, FUNDER gets 75%x50% = 37.5% and you get the remaining 12.5%. Hence, when you sell, you can divvy up profits in proportion to your LLC ownership interest.
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