Partner up with a flipper?

15 Replies

Good morning BP community!

While I was listening to the podcasts, I came acrossed number 53, investing without a loan. I believe it was Brandon that stated if you were to have at least $5000, you can see a big return if you were to partner up with a flipper by setting up a 50/50 contract. Has anyone ever done this? How would I go about doing it?

It seems there It's more to this equation.

I haven't heard that podcast, but yes, there is more to it in reality.

5K might get you in a 50/50 deal on a house to flip, but you'll be doing more to put the deal together I'd think.

Search "Partner with homeowner" that may bring up some posts on getting into doing repairs on a partnership.

;)

I haven't listened to the podcast but as a flipper I can tell you with absolute certainty that I wouldn't partner with anyone just because they have 5k and give them 50/50.. 5k to me is like .50cents I think I spent more than that paying people yesterday.

Now if someone came to me with an amazing and I do mean amazing deal they found and wanted to partner up and only had 5k I would definitely consider partnering but I wouldn't partner purely for the fact that they have 5k. They have to be bringing something to the table.

If you were to put in $5K, find the deal and then do much of the on-site work throughout the project (under my leadership), I'd give you 50%.

In return, I'd put up the rest of the cash, keep things on schedule and budget and teach you what you need to know to get the project done.

Btw, this is not a solicitation...just providing an example of what I'd be willing to do in many situations...

Yes, if you found the deal, had 5K you could get a lender and pay that piper.

Might be cheaper to hire a good lead man and pay him a bonus, at the sale like a grand, having him schedule and keep things on budget.

A lender will also be watching you to keep you on budget, a title company can disburse loan funds and they will keep you on budget and suggest scheduling that reduces draws.

You could shadow any of these folks and learn from them.

I've kept jobs scheduled, that's usually not an hour out of the day when worker you can trust are on the job, usually the phone takes care of it. I can keep things on schedule motivating workers being there in the morning, stop by at lunch for 30 minutes and at the end of the day, another 30 minutes.

I'd bet most would take 50% to do construction management, answer your questions and arrange funding for what you didn't put up, that's overpaying a construction manager.

If you're going to fix n' flip, and you can't do it all, you better start by getting a network of suppliers onboard, they finance supplies. Build your labor force and trades. There is a bit of phycology needed in building a good crew, usually better getting a crew that has worked together. Get J. Scott's book, I bet he address this and much more. You can cut deals to pay less up front and a bonus at closing to some trades/workers, but you'll need deeper pockets as reserves. Having only 5K is pretty thin to work with.

I had borrowers in trouble and needing repairs, some properties had potential making significant improvements (additions) having the owner as a partner means no down, no carrying costs if they are still there and can pay, much of the work avoids permits if the owner is doing it, materials can be floated with suppliers, so 5K can cover exposures much better than if the whole deal is on you. Which was my point above.

You also didn't mention the scope of work or the deal/property. Big difference in a 40K house and a 400K property.

Learn to value the work to be done by a partner, many will simply take advantage thinking you're stuck without options. They'll want 50% when if you look at what the functions actually are you can hire those functions by others, some services are actually duplicated, a good HML doesn't just write a check and walk away, they remain involved. You also need to value what you do in the same light working with a partner. No partnership is 100% fair, but you can get closer when you consider the contributions actually made. :)

@Bill Gulley I think 5k really cant get you into a flip- At least not in my area- Maybe in another part of the country but here it doesn't work. Great example- I bought a house on Tuesday- My purchase price was 135k with a resale somewhere near 300k.

My lender gave me the full purchase price and the full expected rehab costs even with that by the time you add in lender points, title company costs, state transfer and recordation I still ended up coming to the table with over 16k and that doesn't include money you need to get the project started add that in you are somewhere in the vicinity of 25k- 30k.

I think to believe that 5k alone can get you started in a flip and be funded enough to get to even a first draw is crazy and asking for trouble. A lender is also gonna require monthly payments. And if you are new and wrong about your rehab costs and don't have the money to cover the gap between real costs and estimated then you are up the creek.

Totally agree, I mentioned we don't know the scope of work or any of the property issues/price/value. Your comments don't even cover the purchase side. The only way I can see 5K working is partnering with the owner, brining the property up and to market and then splitting profits with them, more of a contractor's ploy.

A 300K property is out of the question. :)

So you would be the one finding the deal, but not have capital/credit (resources) to secure the property and rehab it yourself? If this is the situation and you have a great deal and 5grand and want to learn by doing, I think this is a great idea...and if this is true, the return is irrelevant; the experience is priceless.

If you locate a deal, bring it to an experienced flipper that can close it and fund the rehab, and work through the project together, a 50/50 split on the profit is a good deal. I think there is a lot more to this, but I like the concept as a business model...

@Andrew LeBaron It depends on the market! What I'd give to be in one of those inexpensive areas! If you give me $350,000 I'll partner with you and split profits with you 50/50. As they say, all real estate is local :) Good luck in whatever you do. I'd jump on the offer from @J Scott ..... in fact .....lol

Originally posted by @Karen Margrave :
@Andrew LeBaron It depends on the market! What I'd give to be in one of those inexpensive areas! If you give me $350,000 I'll partner with you and split profits with you 50/50. As they say, all real estate is local :) Good luck in whatever you do. I'd jump on the offer from @J Scott ..... in fact .....lol

And if I were in your area, Karen, I likely wouldn't be willing to do that deal I mentioned.

The big downside to inexpensive areas is that you need consistent deal flow...I need to do 5-10 deals top equal every one you likely do. :-)

To keep busy, I need to be creative to keep the deals flowing...

While it's over simplified, yes you can get into a flip for $5K. Yesterday I went into contract to buy a condo. I'm buying it subject to a $25K defaulted loan. The reinstatement is $1700. And I'm paying HOA liens and legal fees to stop a pending lawsuit for $6000.00. I have the upfront money and the money for the rehab and holding costs. If I didn't, I would use a partner. I know at least two contractors that would gladly show up and do the rehab at their own expense for a share of the profits. They would get double to triple by partnering as opposed to contracting in this scenario.

In fact, if I didn't have the $6K to pay off the HOA lawyer: I work with two agent partners who work with a slew of investors that would jump at the chance to put up the $6K and the rehab cash in order to partner. The agents want the listing and they get paid by the investors for finding them investment opportunities. In that scenario I could get in for $1700.

These are offers you can't typically make on the MLS. That being said, you can always make a sub2 or seller financing offer on MLS listings. You just need to find a way to get the agent paid.

Originally posted by Kristine Marie Poe:
While it's over simplified, yes you can get into a flip for $5K. Yesterday I went into contract to buy a condo. I'm buying it subject to a $25K defaulted loan. The reinstatement is $1700. And I'm paying HOA liens and legal fees to stop a pending lawsuit for $6000.00. I have the upfront money and the money for the rehab and holding costs. If I didn't, I would use a partner. I know at least two contractors that would gladly show up and do the rehab at their own expense for a share of the profits. They would get double to triple by partnering as opposed to contracting in this scenario.
In fact, if I didn't have the $6K to pay off the HOA lawyer: I work with two agent partners who work with a slew of investors that would jump at the chance to put up the $6K and the rehab cash in order to partner. The agents want the listing and they get paid by the investors for finding them investment opportunities. In that scenario I could get in for $1700.

These are offers you can't typically make on the MLS. That being said, you can always make a sub2 or seller financing offer on MLS listings. You just need to find a way to get the agent paid.

@Jon Holdman maybe this excellent post from Kristine Marie Poe could go into a thread of Networking or How to do JVs with rehabbers or How to negotiate a win win.

One of my favorites.

Smart thinking Kristine Marie Poe that's a great way to do deals in California for lower entry costs. I would love to be able to put those together, and in fact, maybe I've been lax in overlooking the opportunity. How much are you anticipating making on the deal when all is said and done?

You know, it would be great for you to post from start to finish one of these deals for people to follow. There's a slew of people coming on here every day that are wanting to learn how it's done. :)

thank you for all the responses! I learn so much by reading these forums. Here in the Phoenix metro area the inventory is so diverse. While I can find a $25,000 junker to convince a flipper, I can find a royal beauty over 500 K that still needs to flip or possibly just wholesale. There are high entity flippers and low entity flippers here in the valley. I am looking for a cheap $60,000 to $100,000 home that needs basic repairs and most flippers don't mind the $5,000 on a 50/50 deal, but that's only in certain financial situations. Most flippers that are buying cheap cheap homes I would think are probably starting out and do not want to pull a hard money loan or qualify for a loan. I guess depends on who you find and what's at stake.

Originally posted by @Karen Margrave :
Smart thinking @K. Marie Poe that's a great way to do deals in California for lower entry costs. I would love to be able to put those together, and in fact, maybe I've been lax in overlooking the opportunity. How much are you anticipating making on the deal when all is said and done?

You know, it would be great for you to post from start to finish one of these deals for people to follow. There's a slew of people coming on here every day that are wanting to learn how it's done. :)

This is a small rehab on a small condo under $100K. Like I said, I have the money. So I won't be partnering on this one. I wouldn't give away 50% unless I couldn't do the deal any other way.

This deal is about problem solving: pending foreclosure, HOA lien, title flaw, non paying tenant......all in one deal.

My point is that for those without a lot of capital or credit, $5K could do a ton of things. This isn't about low value areas versus high value areas. It can reinstate a loan, it can take over debt that can be discounted, it could be consideration on a giant option contract, it can buy a non-performing note or other debt, it could be a down on a seller finance transaction. Use $20K if you think that's what you need for $500K-$1M props.

IMO I'm not that creative. I've seen truly creative and the mega profits that can go with that. It seems to me that the mindsets of many getting into the business during and after the Bubble is that making offers should be enough to get them a deal. Unless you live in area with tons of inventory and no competition (and some do) making offers isn't all there is to it.

Originally posted by Kristine Marie Poe:
While it's over simplified, yes you can get into a flip for $5K. Yesterday I went into contract to buy a condo. I'm buying it subject to a $25K defaulted loan. The reinstatement is $1700. And I'm paying HOA liens and legal fees to stop a pending lawsuit for $6000.00. I have the upfront money and the money for the rehab and holding costs. If I didn't, I would use a partner. I know at least two contractors that would gladly show up and do the rehab at their own expense for a share of the profits. They would get double to triple by partnering as opposed to contracting in this scenario.
In fact, if I didn't have the $6K to pay off the HOA lawyer: I work with two agent partners who work with a slew of investors that would jump at the chance to put up the $6K and the rehab cash in order to partner. The agents want the listing and they get paid by the investors for finding them investment opportunities. In that scenario I could get in for $1700.

These are offers you can't typically make on the MLS. That being said, you can always make a sub2 or seller financing offer on MLS listings. You just need to find a way to get the agent paid.

To me this is a great example of having a solid reputation. If Kristine Marie Poe had done previous jobs in a slipshod way those contractors would likely not want anything but their fees. Perhaps they would even ask for payment upfront, instead she has some willing potential partners.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here