How to partner with a builder/contractor on a rehab

5 Replies

There is a property I think would be a good rehab candidate, but I'm wondering if anyone has partnered with a builder or contractor on something like that (this would be my first flip, and even if I gave some money up it might be worth it to have someone who really knows what they're doing on the rehab side on the team)

Option 1:  I buy the house, pay the architect/builder retail, I sell the house

Option 2:  I buy the house, partner somehow, we split the profits 50/50. (In a situation like this, can I assume that they wouldn't charge the markup for architecture and builder's markup?  I wouldn't be charging my listing agent fee.  We'd be splitting the profit anyways right?)

Option 3:  We set up some sort of entity, buy the property 50/50, and split costs and the profit.  Is that feasible?  

Now that I type it out, option 1 sounds the cleanest with more risk, while option 3 is on the other side of the spectrum, though in that one the builder would have an interest in keeping costs down.  What do you guys think?

Go option 1 but find a rehaber who is not charging retail pricing.

Hire a couple guys and pay the skilled one 15-30 an hour and his not-as-skilled helper 8-10 an hour or be that unskilled helper.  Be there while they work and keep track of time and if they are sitting around not working. You will save over hiring a GC/architect/builder most times and if you pick the right guy, he will do quality work and not be a prick.

@Curt Davis  I'm definitely leaning that way now.  Finding the rehabber sounds like the tough part.

@Jassem A.  I'd rather pay someone than have to be there to keep track of time etc.  That's what the GC is supposed to do right?

@Gregory Tran

Even though you hire a GC you still need to pop in every other day to make sure things are coming along like planned.  You still need to manage the GC!!!  Very important.

GC is supposed to do a lot of things but what most want is to make a big profit off well-heeled investors! 

There's a huge difference between what a lot of contractors charge and the amount of time it actually takes for a single person or pair of individuals to complete a job.  Many times they will make additional work if you're not there to guide them!  Most window companies around here pay their guys about $50 a window to put them in and then charge homeowners and investors 250-1,000 or more to put a single window in.  I doubt they are paying the window wholesaler more than $100 a window.  Most windows can be replaced in about 5 minutes and all you really need is a screw gun and a tape measure!

It's not uncommon for a single contractor to make more than 100 an hour because an investor doesn't know any better.

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