My brother and I are in the infancy stages of real estate investing (research and connecting/networking). And being that he lives in Colorado (Aurora), that’s where we’re looking to start flipping properties. We also have a contact who specializes in siding (let’s call him Joe). Joe has built a network of other subcontractors who he would tap to complete our projects. I guess my question is, does it make sense to bring Joe in as a partner and split the profits 3 ways?
How it would work:
On the first project my brother and I would find the property/lot to rehab/build on. We’d also be the money. Joe would buy materials at cost and tap his network to rehab/build the home for as cheap as we can. So, he’d be playing contractor.
Does that make sense? Or should my brother just hire him to do the job instead (not partner)? What are the pros and cons? Are we missing something?
Thanks in advance BP community!
Hey Joel - First I am a big fan of the Aurora Market to flip in. I have done almost five deals in that area over the last few months. All of my investors that I source Off Market Properties tend to pay out their GC's or folks acting like them. I also listened to the BP Podcast and they talked about it - the conclusion was to keep them out as a partner. For a few different reasons.
Thanks, Spencer. What BP episode # are you referring to? I'd love to give it a listen.
Its episode 399 - and one of the last topics is making a GC/Rehabber a partner. The full episode is good though!
@Joel Arzu - While I understand the appeal of bringing the GC onto the team, it seems like you are giving away a lot of potential equity and also adding unnecessary cooks to the kitchen. I think, in business decision, it makes sense to limit stake holders. For that reason, I would hire the general contractor for your investment in Aurora, Colorado and not make him a partner. Also, if you go to a meetup in Aurora or Denver, Colorado- you should be able to meet people that know a reliable general contractor and can refer them out. Good luck.
@Joel Arzu Interested to hear if you've had any success with flipping in Aurora. And what did you decide to do with respect to making your GC a partner?