I had a deal pitched to me from a money lender interested in residential investments. He has does commercial for the past 40 years, and does very well. He knows nothing about residential, and that is where I come in. Long story short, here is the deal:
-He will give me essentially an interest free line of credit.
-I look houses 100k-200k with ARV of 180-400k.
-Most houses need 30-50k work of Reno
What the big question is..... He wants to fund the project, while I provide the GC and contractors, then we split profit 60%(me)/ 40% (him).
Most profits will be 30-40k, and we would split that.
I like that I'm investing with someone else's money and paying no interest, but I lose profit. Obviously every house won't be a winner either so when we don't make much money, I won't still be on the hook for paying say 10% back.
This investor wants to sign a 2 year deal with me, and non-compete so I can't use other investors money or go do this on my own. After 2 years, if all goes well, he would be interested in starting a new branch in his company and I manage that.
Any thoughts are welcome!!! Thanks
@Cameron Wright Unless he has an unlimited supply of money or you know for a fact that you wont have any free time to take on a project of your own, I would never sign a non-compete.
@Jason D. Thanks for the input! That is a big sticking point with me is the non-compete, but I also will be working a full time job and most of the projects I will be overseeing.
We had first discussed a line of credit and I pay pack interest on what I take, for ex. if I bought a house for 70k and needed 30 k reno, I would borrow the 100k, then pay back 10% on that plus 15% of the profit. Then it changed to the 60/40 split. So if we do well, they are banking on making more that way, rather than if I borrow more, then they make more.