Partner up w/ General Contractor for a Rehab - Good or Bad Idea?

[Karen Reynoso]

We are in the process of rehabbing a property right now and have learned that our general contractor is very interested in investing in real estate. They have expressed interested in learning about our process when rehabbing and possibly partnering up with us on future deals. 

They have brought lots of knowledge and we have also learned a lot from them in regards to project management, rehab costs, and permits. We would be open to partnering up with this general contractor, but I am wondering what would be the right way to structure the partnership. We would still like to use them as the GC for the rehab, but what can we do to make it a fair partnership. I have thought about just using them as a private lender and also still hiring them for the rehab, but that just seems like it is the most costly way of structuring things on our end. 

What are everyone's thoughts on structuring a partnership in which the GC will fund most of the project, and also rehab the house? This will kind of be the first time they would be on the other side and investing in the property instead of just working on it and they really value the knowledge and processes we to bring to the table when turning rehab properties. 

[J Scott]

Personally, I would hire them as the GC (and pay them however you'd pay them if they were a different GC) and then any additional value they bring to the table you can negotiate separately.

I see no reason to give them equity in the deal simply because they are going to be your contractor.  This has several drawbacks:

1.  It's typically more expensive

2.  It's harder to replace them if they don't do a good job

3.  You are then giving them decision-making authority over something you should have complete control of

Just my $.02...