Please, please help me decide a fair profit split on this particular flipping business!
Oh most wise BP members,
I will try to make this as short as possible, but still supply most of the relevant details. Please help me to come to an objective decision on how we should split the profits from our projects.
My cousin and I are flipping houses together. I have done 6 houses so far with him and all have been profitable averaging 25-30%. I have been doing this quite a few years and know the building and flipping business thoroughly. My cousin is smart, has an appraisal license, but no previous construction or flipping experience. He lives in our target market and I am 2 hours away, so I am sort of HQ and he's boots on the ground. He started out pretty much just doing what I told him, but after a few projects now he knows what he's doing and is much more autonomous.
We started with a small property and used subs, on the second I got a remodelers license and we put together a crew and did all except the trades ourselves. That was quite profitable, but a huge headache - now we use a GC/trades hybrid approach. I'll just break down each of our jobs and you guys please let me know what you would consider fair:
So far on all but one deal I have provided all the investment capital from start to finish - about half cash and half personal LOC. One that other one deal I did a personal private loan at 12% but paid the loan costs out of the project and gave a mortgage on the property to the private lender.
We split the cost of our direct mail campaign and have a staffer do the mailings and place online craigslist and other adverts. We both monitor the MLS and take calls and emails from our bird dogs, so lets say the hard part of finding the deals is even.
For leads, we both weed through and I usually decide which ones are worth pursuit, and he actually goes out to see them, takes photos, makes notes, and pulls comps for the ARV if we get that far. I make the decision to make an offer and do the negotiating and write the contracts.
I do the purchase, legal, closings, etc. as he is not a named partner of the LLC.
When we have a property it is his responsibility to get it renovated. I decide the level of rehab and budget, the design ( our rehabs are not just cosmetic ), and usually pick out the materials, colors, etc. He gets all the work done. He will meet with contractors, collect bids, and put together a scope of work. We generally discuss and agree on who we are going to use for each job. From that point he does all the ground work like utility turn on, permits, going by the job(s) a couple times a day, picking up materials, calling the termite guy, writing checks, etc. etc. We speak once or twice a day and he fills out a report of what got done on each job, what mailers went out, who got paid, etc. along with keeping up with the expense account for each job. I spend maybe an hour of my day talking to him about the jobs, making decisions and answering any questions, and another hour researching our next acquisition or checking comps. We both appraise property the rest of the day.
When a project is complete and its time to sell he will oversee our staff running internet and web ads, we put it in the MLS after a couple weeks with a flat rate listing, and he will put out the signs, etc. and show the property to any non-represented buyers.
I want to have a totally fair partnership that can one day be 50/50, but I don't think it is at that point now and I'm having a hard time being objective with family in judging time vs value vs risk at this point, so I'm turning to you in the BP community will steer me in the right direction.
Thanks for taking the time to read and respond.
CJ