Hello BP Community,
I met an out of state investor that I met here on BP (Thanks BP!) that I would like to start a hopefully long and successful partnership with.
Both of us are very interested in the BRRRR strategy presented frequently here on BP, but we were looking for guidance on how to structure this so that it is fair to both parties. Our relationship would be one in which he provides most of the working capital, but we both have some money invested. I would locate the property (I'm an agent), do most of the rehab or manage the rehab, provide the property management, and be the eyes and ears on the ground. All of his initial capital would be returned to him in the form of the cash out or the remaining equity in the property. I would receive an equal portion of the profits. Both of us would own the property in an LLC with divided rights to the equity based on what he had left in the property from the initial investment. At least that's how I envision it if that is possible.
For simplicity we are also considering a simple flip, but BRRRR is very appealing. I was wondering if it was possible with a partnership.
Thank you in advance!
Thanks for bringing up this question. I'm currently facing a similar situation and love to hear others think the best practice to structure this kind of partnership, especially for BRRR strategies.
thanks in advance
You might want to find a RE attorney that has experience with this. You might have the right idea but the devil is in the details I'd imagine. I'm also interested to see how others have structured it but I guess everyone is different.
This looks like a STANDARD Joint Venture to me. Any RE Attorney worth their salt should be familiar with JV Contracts - the percentages can be customized and agreed by each party.
It's largely a matter of TRUST to decide the circumstances the property would be sold - or kept!
Of course, I don't need to remind you that each SELLER you intend to buy from will need to be thoroughly informed (in writing too) that your offered purchase price is likely say 30% LESS than ARV minus Rehab costs ie. roughly the same formula that Flippers use when buying from (mainly unlicensed) Wholesalers. Right? Cheers...
@Brent Coombs Although, there's no liability protection with the JV correct? So if something goes wrong and there's a lawsuit, for example, both partners are liable for partnership debts?
I would guess so. That's another reason why those percentages need to be VERY carefully considered from the start, and, another point to raise with the worth-their-salt RE Attorney...
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