Scenario: We are partnered in a JV deal with a (personal) Private Money lender. This is a four house project - two houses have sold, one is to be finished at the end of November, and the final house in 45 days. We are in a new market and the biggest struggle we have faced is finding the "right" contractors and managing expectations.
- We are to perform 100% of the work, including but not limited to: design, scheduling, managing contractors, accounting, budgeting, (everything that goes into flipping a house), etc.
Our profit split is: 50% of the total net proceeds with no capital invested, interest payments to be paid upon closing of the project.
Our partner is to provide the capital and funding at 6% interest and 50% of the total net proceeds.
We have gone over budget on all four projects. There were expectations on both sides that have not been met which has put a strain on the relationship with our partner.
Our partner has started withholding funds that we need to wrap up the project. We have reworked our system to try and accommodate our partner in order to wrap up these final projects but we are again, in a position where they are withholding funds.
We have requested face to face meetings to go over how we can improve and what they need from us and how we can help meet their expectations. They wanted more transparency and updates as it pertained to funds and project status, of which, I have provided those items. They did not request invoices or copies of receipts, just progress updates, financials, and better communication.
However, since that meeting, our JV partner has been delaying draw releases (which affects our contractors' expectations with receiving payment), and her husband has gone to the job sites and talked to our contractors about expectations that were not met and has pulled them aside to have private conversations. (The husband spoke specifically about their expectations with us to our contractors).
Upon the last draw I’ve requested, she is now requesting invoices for the entire project. I can provide those, however, it is going to delay my ability to continue scheduling and managing the remaining projects and I’m not sure if this is something I should suck up and invest my time in? Is this something I should have anticipated given the circumstances? Do I continue jumping through her hoops with the focus being on just getting these projects wrapped up?
Given the situation, how would you proceed? What is the “right” thing to do?
Thanks in advance!
Yes, continue jumping through hoops until the project is done. You are using other people's money. They want to know what you are doing with it. And if you are having contractor issues, that is on you. YOU did not do something right if you are over budget and are not taking care of their money.
If you are not doing anything wrong, there should be nothing to hide. Show them everything. You should be keeping track of everything anyway, just forward it to them. Stay in constant communication with them. Let them know every detail of the project. Give them an update daily if you need to in order to get them off your back and to trust you again. But I would still give detailed accounting on everything.
Thank you! I appreciate the advice and will move forward in this direction.
Set up a Dropbox, Google docs, or similar that you share between you and your partner. Put every invoice, receipt, contract, note, and all other documents into well-organized folders. Everything. Once you catch up, scanning and doing this every day does not take much time. Add your periodic financial statements.
“I can provide those, however, it is going to delay my ability to continue scheduling and managing the remaining projects and I’m not sure if this is something I should suck up and invest my time in?”
No excuses. Once you took on a partner, @Mikayla Parris , this became one of your most important jobs. As project manager you must keep your investors completely up to speed on all issues, good or bad.
This just sounds like poor communication between partners. Construction projects never go smoothly and I hope your partner doesn’t think differently. Even though she did not ask for everything she probably needs to stay informed, your partner does not know what’s going on, to her satisfaction, and assumes the worst.
This could mean a mandatory ten-minute status phone call every day and/or a weekly meeting at one of the projects so she physically sees what going on. That’s something you can work out but it’s important to talk frequently. Nor should she speak with your subs. Make it clear that this will only confuse them and subvert your authority.
Good luck, Mikayla.
Thank you for help and the detailed response. I appreciate it tremendously!
what your experiencing is par for the course if your going to build in PDX..
keep in mind its your work and their money.. your just out some time.. the other party is going to be out money.
these are high risk ventures. @Jeff S. as Jeff stated its all about transparency.. and everything into drop box is how we do it.. if we have an investor on a project they can see everything we are doing and I include them on the bank account so they can look in and see that as well.
Thank you for taking the time to respond. Based on the responses do see the pattern in which we are the ones who need to improve and the issues we are facing are ours to fix. Thanks for the advice!
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