What's a fair split for a fix&flip JV

2 Replies

I have a couple investment properties but I'm still fairly new to the game. I just got into a JV with an experienced contractor on a fix & flip and was wondering what kind of terms are common. It's a done deal now, just wondering if you think the deal is fair/in-line with market for both parties.

Property is a rural SFR that became bank-owned, squatters moved in, and trashed the place completely. It was a complete gut/rehab. Someone bought it from the bank for $65k, put on a new roof, new siding, gutted everything inside to the studs, new plumbing and electric. We bought it for $110k, and figure we'll throw $70k at the thing for a nice finish. ARV is $260-$280. It would rent for $1600 if it came to that.

Here are the terms of the deal: I put up all the money except $5k. Partner puts up $5k initially and gets a $1k/week draw against his profit share. He does all the work. (We figure 12 weeks for rehab.) Profit split is 50/50. He gets one helper at $20/hr which will be a cost to the JV.

What do you think of the deal? Fair for everyone?

@Pete Bauer It's interesting, because what is fair is whatever both sides agree to. It sounds like maybe you are having buyer's regret here. You said you put up all but $5k of the money, but you didn't specifically indicate who was fronting the cost of the rehab...materials, etc. Personally, if you have funded the JV and argued e fronting those costs, I think 50/50 is skewed towards the contractor, because he isn't assuming any financial risk. Just my 2 cents.

Yes, I am fronting all costs, including material, so I am taking on all the risk. The partner will effectively get his 5k back in 5 weeks and then I'm fronting him 1k/week. But he'll be there 5-6 days a week working on it himself and brings in experience, tools, etc. I agree it's hard to say what's 'fair'...