I have a house under contract for 138k. ARV is 240k. Rehab is 30k. I'm offering half of the net profit to an investor who can provide all the funding. Do you consider this to be a fair deal for both sides? I'm also a contractor, so I plan on doing the rehab myself.
Looks like you're offering 50K for 30K, I'd say if you have the skills, talents, abilities and willingness, it's a pretty good offer, now, how can you show others you have these traits?
Can you show experience in deals done?
Have you looked into a hard money lender?
Is there any way to control this with the owner to get it contracted and accomplished with them?
Good luck... :)
This is a 75% deal. So, with hard money, I'd estimate you'd make a profit of about $25K if you hit all your numbers. You'd pay about $18K for a HML. That said, its very unlikely you would get a HML to give you 100% of the $178K + points + closing costs you need. A money partner would need to provide $178K + costs and the two of you would split about $43K. So, you would be giving up some of your profit for getting 100% financing. Seems like an OK deal if you can find someone to do it.
You say you're a contractor and doing the work yourself. That makes it a bit more complicated. Normally in a 50/50 split like this the rehabber is running the deal, but it hiring the labor. So, labor is a cost that comes out before profit. How are you expecting to get paid for your labor?
I've done deals that I can show. With a HML doing 100% the LTV hits 80% and they won't exceed 75% LTV. I'm planning on doing part of the rehab myself and managing it as well. I'd like to pull out reasonable wages for myself from the rehab budget but holding to the budget. I'm also willing if needed to sub the whole thing out but I'd rather do it myself. I just want to make sure this is reasonable. Thanks.
Yes it is fair if someone agrees to it.
What you are offering is clearly within the range of reasonable and commonly applied. As long as someone agrees to the terms and you accurately describe to them the terms and risks anything they agree to is fair.
Agreed with most of the above...
This deal is reasonable and I see this type of arrangement all the time. The few things I'd ask if I were the investor:
- As Bill mentioned, experience is key. I'd want to know that someone was a SEASONED investor with a LONG track record of success before I lent 100% of the costs.
- If you're getting paid for the construction work, I'd want to negotiate that amount separately, not just bundle it into the rehab estimate. I'd also want to see other bids to ensure that your $30K bid is reasonable.
- I'd want to see an appraisal/BPO to ensure that your ARV is accurate.
Thanks for the feedback!
i would think it would be hard to get such an investor- any luck on that?
Several investors are quite interested. It may be a good model. Unfortunately, I had to drop that particular deal for other reasons but I have more on the way and I'm feeling pretty good about them.
great! If they are interested and you can get them to do it- this is good deal for you- money man always gets the "lion share." For them to let you have 50% is good for you. I think anyway.