Investor deal. Would you take it?

5 Replies

Hi all,

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

@Patrick Hermans thank you for the feedback. He doesn't have unlimited money but he is willing to fund pretty much as many deals as I can handle at a time. So we may have 5 houses going on at a time or 10 but he does have the funds. At the same time I also will be doing some of my own deals with my own money. What do you think about the profit split? I thought it was pretty fair but wanted some opinions

@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.