Partnering with Contractor on 50/50 Fix & Flip – Looking for Advice

[Payson Kelley]

Hey everyone,

I just lined up a contractor who’s interested in partnering with me on a fix and flip. The setup we talked about is: I’d source the deal and get it under contract, and he’d handle all the renovations. We’d split the profits 50/50 through a joint venture.

Has anyone else here done something like this before? How did it work out for you? Any challenges or things you wish you set up differently?

Also, where’s the best place to actually get a JVA contract? Should we just download a template somewhere, or is it better to sit down with a lawyer and have our roles/responsibilities clearly defined in writing?

Appreciate any advice or lessons learned you can share.

Thanks!

[Andy Sabisch]

This is not unusual, but you need to have roles and responsibilities clearly defined - and that is verry important to a successful outcome.  The timeline needs to be included - if you are carrying the property, overages can cost you dearly and how will the carrying costs factor into the profits.  The agreement needs to clearly state who is doing what in detail, what the timeline is, how the profit is computed (ensure carrying costs are part of the contract) and what the downside is if timelines are not met.  For example, if the contractor gets pulled onto another paying job and your flip sits for a month, you are paying the carrying costs until he / she comes back.  It may come out in the end but debt service can put a crimp on immediate cash flow.  A lawyer may not be versed in the project to give you a detailed breakdown - there are templates you can use and have it signed and notarized by both of you.  We did this once and if there is something that is not clear or covered you can be sure it will come up and then the challenges between the two of you arise.  

Here is a template that should serve as a starting point.  

16 Joint Venture Agreement For Fix and Flip | PDF | Joint Venture | Trust Law