Does anyone have any contracts or have any guidelines they go by when profit sharing with a new private lender? I have a meeting with a private lender and we wanted to go over some other ways we could be funding Fix/Flips. However im really just used to working with hard money lenders that supply all the needed docs.... Any help would be greatly appreciated.
Was not clear on the kind of deal you propose for your JV. Here's something for new construction that you can easily adapt to a fix/flip, and it give you a sense of the possibilities. Really, it's whatever you agree to. These are the terms that would be incorporated into the LLC created for this purpose. They would become part of the LLC OA.
Terms for Operating Agreement of 123 Main St, LLC
Black Label Properties, LLC will have 100% ownership of the project LLC at time of creation, with [JV Partner] having remaining 0%. Entity will hold 1 parcel of land: 123 Main St.
Entity will obtain construction financing to build 1 single family home from [Bank] with the principals (if required) of Black Label and [JV Partner] both cosigning on the loan.
Upon completion of the 2 projects and obtaining the CO, [JV Partner's] ownership will vest to 50% and properties will be sold.
[JV Partner's] ownership stake in the LLC (and the 2 properties) will go up 1% for every 2% of construction completed, as determined by the independent bank inspector during draw inspections.
Proceeds of the sale of each house (net of realtor commissions and seller closing costs) will be disbursed as follows:
- First to pay off construction loan until paid off in full
- Then to recoup Black Label’s full investment in the land, including cost of land, closing costs, surveys and any other out of pocket costs.
- Then to recoup [JV Partner's] out of pocket expenses, if these expenses were not recouped from the first construction draw.
- Then remaining profits will be split 50/50 between [JV Partner] and Black Label.
[JV Partner] will be responsible for funding the work prior to the first construction draw. He will then recoup any out of pocket construction expenses from the first draw.