I know there are quite a few ways to structure a deal when it comes to rehabbing a house but I wanted to get some opinions. I want to partner up with a friend who owns a construction company and as experience rehabbing homes to flip. He doesn't want to use his crew (higher end carpenters) to do the work so we will be finding subcontractors. He doesn't have very good credit and doesn't have a lot to put down on the deal. I on the other hand do not have the rehabbing experience but have the cash and credit to fund the deal.
We both decided to flip a couple of house first to see how it goes before we establish a business entity together. So, the question is, if he is going to be managing the crew and the day to day issues and I am funding the deal, what's the most fair way to do this? Should it be 50/50 profit split? Should I put him on title? Should I have his co-sign on the loan so he has skin in the game? Do we need to have some legal document in place to define how profits or losses are to be split? Any advice would be greatly appreciated.
@Brett Bumgarner I don't have the answers but I am sure looking forward to the experienced REI to step in and lend ideas. Working on same plan somewhat. Good Luck Bret.
Seems to me you are paying him to make you feel secure, Like a insurance policy. So if you are putting up all the funds and taking all risk. Maybe hire him as your project manager for the first few flips. YES! you will want to get a lawyer write contract in place defining each of your roles and loss or profits or payment if you go the project managers way. Also you will want him to agree to a finished date of the project. If not reached then you could subtract some dollar amount for every day late. These are just a few things to think about.
Feel free to reach out to me, I have been flipping for 20 years.
Depends on who's doing much of the work.
Is your partner going to be responsible for construction only? or will he/she be doing other work like doing comps, research, finding a buyer, working with realtors and lawyers? if you will be funding plus doing the above and your partner is only on construction, 70/30 would be ideal.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing