Partnership with a General Contractor

Houston, Texas
General Real Estate Investing
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Partnership with a General Contractor

Ron Dancy
Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes

Hello BP Family! Wanted to pose a question. Have you ever considered or successfully established an partnership with a General Contractor on your deals? 

Meaning; You would acquire the property or deal and the GC provides the rehab budget and Subcontractors to complete the work. In turn the profits are split 50/50 or an agreeable payout depending on the deal split.

What has been your experience? Good or Bad? Comment below⬇️

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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
8mo

Never considered it. What happens if there are cost over runs or the property doesn’t sell for what you thought or it takes longer than it can lead to issues on who should eat the cost. It’s best to hire a contractor to do the work and pay them

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    8mo

    Never considered it. What happens if there are cost over runs or the property doesn’t sell for what you thought or it takes longer than it can lead to issues on who should eat the cost. It’s best to hire a contractor to do the work and pay them

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  • Ron Dancy
    OP
    Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
    8mo

    @Chris Seveney Thanks Chris for the input.

    That's too valid points. I look at it as risk migration. If the contractor doesn't have skin the game to ensure no overage or stoppage during the project then there's no accountable for them to take the money, complete some work and leave.


    On the investor side, you have to ensure your numbers are correct in terms of ARV or evaluation. Anything over 50%/60% acquisition would be a difficult project anyways

    Ultimately, when the GC is a partner rather than just a vendor, the goal shifts from 'finishing the job' to 'maximizing the profit.

    0Reply
  • Daniel TanasaBusiness Member
    Realtor · Houston, TX · Member since 2019 · 351 posts · 174 votes
    8mo

    Hi Ron, 

    I personally never done it, but I think it can be a very powerful arrangement where both the investor and the contractor wins. 

    In theory you should be able to do the job faster and for less money since both contractor and investor are aiming to get it on the market ASAP to maximize profit. There can be an arrangement to pay the contractor only for the materials upfront and they will get paid for the labor at closing and minimize hard money cost also. Or if the contractor is able to have more skin in the game, you can ask them to cover material cost also and only get paid at closing. 

    Many ways to get this done. Let us know if you pull this off successfully and how it goes. 

    Good luck!

    1Reply
  • Ron Dancy
    OP
    Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
    7mo

    Thanks Daniel for the feedback. I have a few colleagues that has done this model and it works because to finalize the completion of the project is predicated on the GC side to get it done.

    I think another option could be just straight up 50/50. We both put up a portion of the acquisition cost and we both contribute to the rehab budget. That way the GC partnership would have some type of asset anchored to their investment.

    2Reply
  • Daniel TanasaBusiness Member
    Realtor · Houston, TX · Member since 2019 · 351 posts · 174 votes
    7mo

    That could work, if you find the contractor to do that. 

    1Reply
  • Ron Dancy
    OP
    Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
    7mo

    I guess the only metric to consider would be the capacity of how many deals can be done at once or do you slow pace the process to build it up overtime.

    1Reply
  • Sid Baweja
    Member since 2026 · 1 post · 1 vote
    7mo

    Hi Chris,

    Good luck - I'd be interested to learn from your experience. I imagine that most GCs would prefer a predictable income (revenue) rather than risk a loss.....but maybe there are some entrepreneurial types out there.

    1Reply
  • Ron Dancy
    OP
    Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
    7mo

    Thanks to Sid for your reply. If the mission and plan are clean and concise, then the risk factor is essentially mitigated. Too many times, the investor is looking to be greedy and squeeze money from the GC’s budget, while the GC is looking to squeeze money from the investor to make a higher margin.

    The GC and investor approaches should be aligned whether they are partners or not; however, the real estate investing industry as a whole has become fragmented. There are too many players (investors, GCs, subcontractors, lenders, etc.) in the game who are not honest or honorable.

    1Reply
  • Troy FallonPro Member
    Member since 2026 · 13 posts · 7 votes
    7mo
    I am a contractor who is getting into the investment market. I think it is a great idea, I am biased though. If you find a reliable honest contractor and you have a well defined partnership, I think it is a win, win.
    1Reply
  • Ron Dancy
    OP
    Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
    7mo

    Thank you @Troy Fallon for the reply. That's awesome to hear that you're getting into the investment side. What's your market area?

    I would agree on your take.

    0Reply
  • Troy FallonPro Member
    Member since 2026 · 13 posts · 7 votes
    7mo
    Spartanburg/Greenville SC
    1Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    7mo

    As a Contractor , I wouldnt be interested in this at all . I make a handsome profit on the work in itself , with no risk , and no money spent .   

    1Reply
    • Ron Dancy
      OP
      Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
      7mo
      Quote from @Matthew Paul:

      As a Contractor , I wouldnt be interested in this at all . I make a handsome profit on the work in itself , with no risk , and no money spent .   

       Hey @Matthew Paul thanks for reaching out. Lucky for you, your experiences have been positive. I have several colleagues that went through gauntlet of dealing with unreliable contractors.

      Every market is different. Every relationship is different.

      0Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    7mo

    @Ron Dancy It swings both ways also , I have had my share of unreliable , slow and no pay customers .

    1Reply
    • Ron Dancy
      OP
      Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
      7mo
      Quote from @Matthew Paul:

      @Ron Dancy It swings both ways also , I have had my share of unreliable , slow and no pay customers .


       I hear that a lot as well. Especially unverified or recommended investors and GCs.

      1Reply
  • Billy Smith
    Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
    7mo

    What I use to see a lot was general contractors have a family member pull a real-estate  license for selling  their jobs .

    1Reply
  • Bo SmithPro Member
    Hinton, WV · Member since 2026 · 1k+ posts · 373 votes
    7mo

    Yeah I've done a few partnerships like this. Key thing: get timeline penalties in writing upfront. GCs are always optimistic on timelines and your holding costs add up fast. Have you found a GC already or still exploring?

    0Reply
    • Ron Dancy
      OP
      Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
      7mo
      Quote from @Bo Smith:

      Yeah I've done a few partnerships like this. Key thing: get timeline penalties in writing upfront. GCs are always optimistic on timelines and your holding costs add up fast. Have you found a GC already or still exploring?

      Bo, thanks for the reply. Time is money is an understatement.

      Still exploring. Wanted to create a conversation around the topic.

      @Bo Smith

      0Reply
  • Philip Rayos
    Member since 2022 · 5 posts · 3 votes
    7mo

    I've done it and it's been a good experience. You just have to make sure you trust the GC/builder and that everything is open book and fully transparent. 

    1Reply
  • Ron Dancy
    OP
    Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
    7mo

    Great feedback @Philip Rayos! That's exactly right the trust factor.

    Everything above board and 1 common goal.

    Did you form the partnership with someone you've known or met through networking?

    0Reply
  • Philip Rayos
    Member since 2022 · 5 posts · 3 votes
    7mo

    Someone I met through my wholesaler. 

    1Reply
  • Ron Dancy
    OP
    Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
    7mo

    Nice! Is your partnership still active?

    0Reply
    • Philip Rayos
      Member since 2022 · 5 posts · 3 votes
      7mo
      Quote from @Ron Dancy:

      Nice! Is your partnership still active?


       Yes, we have a couple of projects in the works. 

      1Reply
  • Warren Powers
    Member since 2019 · 60 posts · 31 votes
    7mo

    Only after detailing the responsibilities of each party can we provide insight on a split. I have done deals at 100% ownership, making sure my contractor is well provided for and incentivized to get it done and want to do another. I have also been 0% ownership and only take points and interest for money provided. If I do a split, then every detail of what each party brings to the table slightly adjusts the split. A generic split of profits is not beneficial to anyone as it may not be fair or sustainable.

    1Reply
    • Ron Dancy
      OP
      Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
      7mo
      Quote from @Warren Powers:

      Only after detailing the responsibilities of each party can we provide insight on a split. I have done deals at 100% ownership, making sure my contractor is well provided for and incentivized to get it done and want to do another. I have also been 0% ownership and only take points and interest for money provided. If I do a split, then every detail of what each party brings to the table slightly adjusts the split. A generic split of profits is not beneficial to anyone as it may not be fair or sustainable.

       @Warren Powers That's an interesting take. With the 100% ownership beyond the normal budget outline, what incentives besides their 15-20% spread would be considered? Bonus structure? Normally most investors would say they have other projects in the pipeline to try entice GCs to cut them a deal.

      0Reply
    • Warren Powers
      Member since 2019 · 60 posts · 31 votes
      7mo

      @Ron Dancy I have struggled with contractors failing to meet their (own) projected timelines and budgets. Going forward I plan to work closer with my contractor to set budgets and timelines that are situationally realistic with margins for error and share the margin back to the contractor if expectations are met. 

      0Reply
  • Ron Dancy
    OP
    Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
    7mo

    @Warren Powers How much of a margin do you account for 5%, 10%, 15%?

    0Reply
    • Warren Powers
      Member since 2019 · 60 posts · 31 votes
      7mo

      @Ron Dancy I am still learning as I go(most things the hard way). I am working on the details with a new contractor/partner before our first flip together now but it looks like I will be back to the private money role on this one. I wish I had the perfect formula worked out but I just try to put the best deal together I can with what I have to work with.

      1Reply
  • De Rasche
    Real Estate Agent · Near Memphis, Tenn. · Member since 2019 · 88 posts · 34 votes
    7mo

    I have a contractor friend who does this, what he leaves out on the front end is his salary and others in the cost to rehab, a 10% mark up on materials.  Then still splits the profit.

    1Reply
  • Ron Dancy
    OP
    Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
    7mo

    @Warren Powers Got it. Are you doing flips or new construction? What's your out-of-pocket contribution?

    0Reply
  • Ron Dancy
    OP
    Real Estate Consultant · Houston, TX · Member since 2017 · 114 posts · 44 votes
    7mo

    @de 

    @De Rasche Nice! That would be a huge indicator in excluding salaries or funds needed to run day to day operations. Going from 65k for a rehab to 45k is a significate difference in securing a HML. The questions is; Can you wait on the backend to get paid or needing money in the beginning to take care of bills.

    0Reply
  • Jim Bryson
    Contractor · Winder, GA · Member since 2016 · 84 posts · 3 votes
    7mo

    I'm a unlimited licensed contractor/developer. I offer equity opportunities where you inject the equity that triggers a 70% LTV construction loan all the equity is reimbursed and we're basically financed 100%. We split oh cash out that stabilization and any equity 50%. This is on my flex /retail / Medical developments

    1Reply
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