JV Deal Structure with Contractor

[Ryan Whitelaw]

Hi All,

I'm looking for suggestions on how to structure a joint venture (JV) BRRRR deal with a contractor. I'm a long time investor and currently have a mix of commercial and residential rentals. I'd locate the deal and bring in the majority of the cash. That said, I'd like them to have a little skin in the game. How have you seen these deals structured where the contractor can get a piece of the equity for completing the rehab? Thanks in advance for any info.

~Ryan

[Barry Ruby]

@Ryan Whitelaw determine the total equity required to do the deal and allocate the contractor’s ownership piece proportionally.

If a personal guarantee is required for the loan, adjust ownership % accordingly.

[Scott E.]

You can really structure this however you and your contractor agree is fair. I've done 1 deal this way in the past and it looked like this:

1. I found the deal, bought the deal cash, and put together the team of GC, designer, architect, engineers, landscaper, etc

2. The GC put up the rest of the cash for the build and completed the build at cost

3. We split the profits 50/50 at the end

In this deal I put more cash into the deal than my GC did, but I was ok with that because it was a lot of work for him to manage the job, sub everything out, etc.

[Bruce Woodruff]

I've done this as the Contractor. I did everything except provide any $$ and we split 50/50. But I mean everything. I found the houses, bought them, fixed them up (my crews and subs) and got them sold.

[Chris Seveney]

@Ryan Whitelaw

Don’t do it. You can thank me later. Construction is never on budget and don’t mix the two.