Flipper · Frisco, TX · Member since 2016 · 9 posts · 0 votes
My buddy and I started our own LLC to finance cash purchases of houses to flip. We are working with a local GC under the agreement that the profit from the flip will be split 50/50 with the GC and our company.
My question lies with the purchase of the house. Our GC said it would be easiest for them to be the owner and us to be the lender and have a lien against the house and provide the capital. My thoughts are I would want my business to own the house and have the deed in our company name. Heaven forbid something happens, if they owned it I would have to wait a year (I think) before proceeding with foreclosure on the property vs if I owned it, I could do whatever I wanted with the house and any point I so chose.
Am I overlooking something here? Any thoughts and advice are greatly appreciated.
Thanks for the help and am looking forward to being a contributing member to this great BP site.
Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
9y
I guess there's pros and cons either way. You will have less liability if you have a lien instead of title to the property. Most lenders prefer it this way, but I've heard of them holding title as well. But as you stated if the GC disappears, foreclosing is a pain in the butt. Maybe it depends on how much you trust the GC, and what his reputation around town it? Has he worked with anyone in the past you could get a reference(s) from?
Another thought, since you're splitting the profits 50/50, be sure to get an itemized repair list from the contractor. He could try to inflate the repairs, pocket the difference, and then still get the 50/50 split. If the repair bill is $20k he may say it's $30k.