I have a question concerning a possible fix and flip deal that I may be involved in. I am working with an experienced fix n flipper who has over 50 flip deals. He picked up a house local to me and I pitched the idea of a possible partnership between the two of us on this deal. Myself with no fix n flip experience and he has a lot of experience. The property was picked up at $230k, needs about $40-$60k in rehabs. I offered to contribute $25k to the deal, and run the job (ie meet with contractors, get bids, make sure jobs are getting done in a timely manner, etc. He has the deal funded, and is considering working with me. My question is, taking into consideration my contribution to the deal, running the job, and my little experience, what do you think would be a fair way to structure this partnership? What would be a reasonable way to split the earnings? Any advice is appreciated. Thank you
@Jared Standiford If you're able to manage the job on your own, it sounds like a 50/50 split to me. If he's helping you with that, then he should make more.
It's tough to quantify what your effort is worth to the project. I'm not trying to sound mean; just trying to be objective at the situation.
Presumably, he'd be completely comfortable and able to run this operation without you since he's had experience and likely has systems in place to succeed (unless you are in a new market for him). He's probably using his own contractors, etc and there is already a level of trust and expectations between the two parties, so how much value does a supervisor add? That's a difficult thing for outsiders to assess. For me personally, I'm happy to pay a premium to have someone like you handle dealing with contractors; others don't mind it.
It's great if he's willing to let you buy a piece of the deal since it isn't something he needs to get the property closed.
At the end of the day, even if he doesn't let you in on the deal financially, it is a great opportunity for you. To see a project from start to finish, not to mention the value in building a relationship with this flipper, could be a tremendous learning experience that will help you down the road.
tl;dr the obvious route is to just get close to a fair-share of your contribution. So $290k all-in would leave you about 8.6% ownership at a $25,000 financial contribution. Maybe you could bump that to 10-15% if he feels your supervision is worth that much. If nothing can be worked out, it still seems like a great thing to do for free to learn and build a relationship with this flipper.
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