Contractor wants to Partner w/ us - Would you do this deal?

3 Replies

Hey all,

We connected with a local property management company in the area we want to invest in and the contractor they use for all rehab/repairs.  The contractor knew of a guy who wants to sell his house (off market) that needs work.  

We were still doing our research the past couple days but the plan was to do a BRRRR deal on it and use the contractor to do the repairs. Well, the contractor took an interest in the house himself and did some haggling with the owner about the price.

The bottom line is: it's a good deal and now the contractor is asking if we want to partner with him somehow.

Purchase price will be around 39k and rehab needed is $15k including labor/materials.

Financially we don't need the partner, though it's out first deal in that area. How would you even structure a deal like that?  Would you do it? 

The only way I see it making sense to partner w/ him is if we got discounted labor rates or something, maybe free/discounted labor on repairs in future, but still not sure how exactly is a good structure.

Input appreciated!!

I think going out and snagging the deal alone would be more detrimental. If this contractor is known as being reliable, or was referred to you by a reliable source, then you've already taken a load off your shoulders. If his own money is in the deal, he will show up and work.

To structure a deal with him, come to an agreement, and have an experienced attorney put it all together.

@Brian Dickerson

I've had contractors discuss partnerships before but I haven't pulled the trigger yet for the same reasons as you.  I'm not sure how to structure it either.  Similar to you I don't need a money partner, so I'm not sure how it would benefit me to enter a partnership with a contractor.  The only thing I would think of is you should fund the deal, the contractor does the work for a discounted rate, and then you split the equity gain 50/50.  But of course the contractor could play some games with the "discounted rate".

I'm hoping others will chime in as I'm sure others have done this.

Thanks for the responses guys.  Hoping for someone experienced in partnerships to chip in. The contractor has never partnered before but he knows this property is a good deal so he's interested.  He couldn't come up with a way to structure it either, so he will likely accept anything reasonable we give him.