Developer · Philadelphia, PA · Member since 2013 · 87 posts · 62 votes
Does anyone have an experience putting together a joint venture on a flip with the existing homeowner... please read scenario below:
1. Seller has a property they want to sell for $175,000 but no money to complete renovations.
2. Investor (Me) has the funds to complete the renovation, which would be approximately $50,000. I do have the funds, but do not want to buy the house at $175,000 and put an additional $50,000 into it.
3. After Repair Value on the house would be $325,000+
4. How do you structure the JV for the seller to contribute the house 'value' of $175,000 (or less), and I contribute the renovation costs at $50,000?
- How do I assure my profits? (do I take title, assume mortgage?)
- How do we split proceeds? (if any split at all)
- Is there a better way to arrange this so I can limit my cash outflow?
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Give the seller a $10K downpayment and have them carry back $165K for 6 months at a mutually agreeable interest rate. If the seller has a mortgage, take the property subject to the mortgage for 6 months, and have them carry back the balance. This way, they get their asking price and you get a loan with decent terms. Additionally, you own the property during rehab. Skip any joint venture agreement or any equity sharing unless the seller won't work with you any other way.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Give the seller a $10K downpayment and have them carry back $165K for 6 months at a mutually agreeable interest rate. If the seller has a mortgage, take the property subject to the mortgage for 6 months, and have them carry back the balance. This way, they get their asking price and you get a loan with decent terms. Additionally, you own the property during rehab. Skip any joint venture agreement or any equity sharing unless the seller won't work with you any other way.
Developer · Philadelphia, PA · Member since 2013 · 87 posts · 62 votes
12y
Kristine, I think that's great advice... Except I left out the important point. This is a divorce and I don't believe the two individuals will come to these terms for seller financing or carry back. What is the next best option if I can't assume the mortgage or have the seller carry it back?
Kristine, I think that's great advice... Except I left out the important point. This is a divorce and I don't believe the two individuals will come to these terms for seller financing or carry back. What is the next best option if I can't assume the mortgage or have the seller carry it back?
If you can't get them on the same page enough to carry back the purchase price, you're not going to be able to have them "contribute" their equity either or make any kind of deal. You can't make a creative deal with sellers that won't work together. Cash is always king. Find a private lender or hml to buy the property and cash out the sellers at $175K. Pay the points and the high interest rate for the short term. Do your rehab with your own funds and resell. Those types of deals are funded by hmls everyday
Rehabber / Flipper · Simi Valley, CA · Member since 2010 · 597 posts · 259 votes
12y
If they want to sell for $175k, the house needs $50k in repairs and will resell for $325k, that sounds like an excellent deal. If I had this opportunity, I wouldn't play games. I'd buy the house for cash and be thrilled. Refi with a hard money loan after purchase if you want.
If they want to sell for $175k, the house needs $50k in repairs and will resell for $325k, that sounds like an excellent deal. If I had this opportunity, I wouldn't play games. I'd buy the house for cash and be thrilled. Refi with a hard money loan after purchase if you want.
I know, I feel the same way. I'm working a deal right now where my buyers will be paying $172K to rehab and resell for $240K. Margins are thin these days. I'd not try to get creative on the OP's deal either. I'd just buy it.