Partnership with contractor
I am starting a partnership with a contractor. He is completely reliable and I do not have any issues with him. I will be putting in the cash and he will only charge for the cost of material and labor, and completely exclude the profit he makes on his typical renovation jobs. Currently we are looking into BRRR deals and fix and flips. My question is how should we share the profit? what would be fair? let me explain with an example:
Purchase price: 200k
Rehab cost: 100k (with a non-partner contractor)
Charge by my contractor: 50k (only material and labor)
After Rehab sale price: 300k
Profit: 50k
My question is how should we share the 50k profit? 20%/80%? the problem is that I would 40k for my 200k investment, which is a good 25% return, but he makes 10k, while he would make 50k for a regular renovation job, so this deal would not be interesting to him.
I hope the situation is cleat, I would appreciate your insights.