New residential construction partnership structure - How to split
Hello,
I own a lot in an existing neighborhood which homes currently sell for 350k. I am currently a builder myself and was approached by another builder in the neighborhood who is currently building a home down to street to buy my lot and/or partner on my lot to build a home together. I am in with the lot at 40k and he offered me 60k (which I do not want to do). How could we make this deal a win/win for the both of us? I am trying not to use my liquid capital to fund the deal. Could we orchestrate something like he put's up all the money to build it and gets a higher percentage or what do you guys think? To add to this equation, the profit on such home would be about 75-100k.
Thank you in advance.
I own a lot in an existing neighborhood which homes currently sell for 350k. I am currently a builder myself and was approached by another builder in the neighborhood who is currently building a home down to street to buy my lot and/or partner on my lot to build a home together. I am in with the lot at 40k and he offered me 60k (which I do not want to do). How could we make this deal a win/win for the both of us? I am trying not to use my liquid capital to fund the deal. Could we orchestrate something like he put's up all the money to build it and gets a higher percentage or what do you guys think? To add to this equation, the profit on such home would be about 75-100k.
Thank you in advance.
Most Popular Reply
If you are already a builder, why wouldn't you list the house on the MLS as to-be-built and let a client get a construction loan? That would be the lowest risk and highest profit for you. If you want to build a spec house to avoid the hassle of a custom build situation, you could also get an REI/hard money loan for the construction. If you own the lot free and clear, they will fund 100% of the construction. You will need to fund each phase of work and then apply for a draw on the loan, however.