Hello and happy Thanksgiving everyone,
I am relatively new to the boards here on BP and would appreciate any helpful advice.
A contractor/investor friend of mine has gotten a rehab under contract for 6K cash (yes, it's in bad shape) he says he can get back into shape for about 20K.
He has asked me to join him in the deal primarily to help him acquire the property. My cash investment isn't a tremendous amount of money, but I do want to be sure friendship and cash is protected should anything go sideways.
My investment would be 5K to be delivered at closing Monday Nov 30, 2015. And sweat equity to help rehab the property (which I was going to do anyway to help him out and learn from his process). My return would be 25% of profits
How complex of a contract/note do I need to have in place?
Here are the details of the deal if needed:
- Property details: Single family home 2 bed, 2 bath, 988 sq ft.
- Purchase price: 6K (him and I are splitting the purchase price)
- ARV: about 75K
- Exit strategy: Rehab and sell retail or sell to investor
- Rehab estimate: 25K (separate private money investor in place for rehab expenses. She receives 25% of profits when sold)
- My investment: 5K plus. I receive 25% of profits when sold.
- My friend pockets 50% of net profit as he is doing the rehab.
Again, a contract template example would be helpful.
Thanks in advance.
You need a Florida Attorney to draw up your agreement.
Time to call your Florida lawyer. Good luck.
@Carlos Castellanos an attorney who practices contract law to draw up a Joint Venture agreement for the profit sharing component. Ask your title company if they will draw up a set of notes and mortgages for the financial investment from you and the private lender.
Should I mention an attorney?
You need a note and deed of trust, check the minimum amount that may be secured by a deed of trust, 5K isn't much. Don't invest more than you can afford to lose. Hint, if he needs your 5K he isn't that successful! Money and friends rarely work out well, almost as bad as money and family! Which do you value more?
Go see an attorney, in case you missed it.....LOL :)
Thanks everyone, I am very appreciative of the feedback.
I've chosen to pass on the opportunity. Ultimately, I realized I didn't have enough time to do my due diligence, line up what I needed, and didn't want to rush into anything that would risk the friendship if things went sideways.
I now go ahead and find the appropriate attorney or title company to write up a contract that I can use moving forward and be well prepared for the next opportunity.
Thanks again gentlemen. : )
P.S. Loving the community here on BP. You guys are awesome. Learning tons.
@Carlos Castellanos I have an attorney I have used on multiple occasion's to draft up JV Agreements, Construction Loan Agreements, Personal Guarantees, Notes, and 1st and 2nd mortgages. Obviously he is aware of FL lending law and usury (Florida usury law can be to most restrictive) and he ensures I stay within the law every single time. If you would like I can connect and send you over his information.
@Edwin E. Thank you, sharing your attorney contact would be greatly appreciated.
Carlos, If you will please private message me, or you can send me an email. I do not want to open post his contact information, thank you, and you are welcome!