Partnering with a GC - what % would be good?

Question

Travis Boyer · Answer

In my scenario my GC was looking for properties and walking them before me to see if it was worth it or not. Of he thought it could be a deal he would call me to come view it with him then together we would work the numbers.

Brandon Siewert · Answer

I was considering partnering with a GC as well, but my approach depending on the estimated cost of the rehab was for me to find the property, make the purchase and the GC would perform the work based on the estimated cost at his expense, then sell the house, taking his money out of the gross sale plus a predefined profit split.  What was described above sounds like the investor puts up all the money, pays the GC for the work, then gives them a bonus out of the profit.  Did I misunderstand something?

Travis Boyer · Answer

Your welcome,  good luck and let us know how it goes!

Manolo D. · Answer

20% is a good figure. 20% on top of everything.

Travis Boyer · Answer

Yes I am paying for his costs and markup but we agreed on a budget before the job started and he is responsible for overages. ..right now he's is out $9,000 for a few things he missed from his original walk through.  I am not sure what their markup is...I'm sure each contractor is different depending on their business model.

Elizabeth Cook · Answer

Travis,

Thanks for your input!  That is right in line with what we were thinking.  In your example above, when you pay the GC for the rehab, are you paying for his costs and a GC markup? Do you know how much markup GC's generally tack on?

Manolo D. · Answer

If you expose all the money, you could offer 25% of the profit, everything is at cost. the agreement must be of full transparency, each receipt is kept, each payroll record is submitted before paying.

Travis Boyer · Answer

Hi Elizabeth,  I am currently doing this right now on a flip. I was responsible for getting the loan, paying closing costs and earnest money.  The GC gets paid for the rehab and we split carrying costs. When we close the percentage I get is 80%, he gets 20%