I am just getting started in real estate. Wanting to get deals on buy and holds but have run across a couple of leads generated off my website that seem to be good for flipping but not that great as rentals.
So on the first one I have partnered up with a friend who is a broker and wholesaler so I could learn on this first flip. We signed a JV to split the profit 50-50. He is negotiating the price, did the walk-through and repair estimates. Is this a good idea, bad idea? Suggestions?
I have another house that I want to flip and I would love to do it on my own and make more $$$ but I think partnering again may be the smartest thing to do. He knows the contractors, has the lawyer and title company relationships.
Just not sure what do path to go right now...the logical side of my brain says to do another with my friend to continue to learn. Guess maybe I should get the flipping book I see here on the marketplace because I feel like I need a general overview with a few step-by-step instructions and a list of do's and don'ts.
Oh, I am financing the house and rehab and he is doing all the legwork at this point and when we sell he would get his 3% as the listing broker.
All suggestions, guidance and constructive criticism is welcome :-)
@Brent Hill , welcome to BP. This not a 50/50 split. Your friend is getting their commission on the sale (and the purchase?) in addition to their share of the profit so you are getting less than 50% of the profit. (If your friend is a good negotiator he may save you money on the purchase and make you money on the sale.) You are taking all of the financial risk. Does your agreement require your friend to write a check if this project loses money? If this project puts some money in your pocket while you learn the process and meet the contractors that is not such a bad deal. Sure beats paying someone for coaching or mentoring.
A lot of partnerships are structured like that... Investor puts up all the money and the other partner does all the work. 50 / 50 split. Seems fair. IF.. this guy knows what he is doing and pulls it off. If it doesn't sell make sure it works as a rental for a year or two.
Also make his commission a % of profit not sales price. 0 profit = 0 commission
:) Good luck!
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You mentioned this guy is a broker and wholesaler...you said nothing about him being a rehabber/flipper...
How many flips has he done? What makes you think you can trust him with your money/deals?
@Jeff Rabinowitz No, the contract just states we split 50% of the profit. Got any JV agreements you can share? Maybe need to get my an attorney.
@Ryan Mullin thanks. It would not work as a rental to my standards.
@Linval T. Thanks for the suggestions..yes, I am listening to podcasts everyday, reading some books, networking here and locally in my local REIF, studying to get my realtor license by end of year and reading in the forums
@J Scott Good question. I know he has done some but I guess I dont' know how many and havent seen any he has done. For what it is worth, I know he uses the software RealFlow for his estimating. I don't trust him with my money at this point which is why I am here :-) I am a skeptic and trust is hard to earn with me so I am very leary to do much unless he has some skin in it to. That is where I am looking for suggestions on what people have done before and how they have structured their JVs so that it is a win-win. He makes money, I make money but I learn in the process. I am bringing the deals to him through my marketing and I have a chance to learn..what is all that worth?
@Brent Hill , I have only done one JV project. It was complicated and the structure was unique for that project. When I fund a joint project I like to know what I am going to earn. I usually do my cooperative deals as a lender. This is usually less expensive for the rehabber and locks in my return. I put in an incentive to make sure my projects get completed on time. I will only very rarely fund an entire deal for someone else. If I am taking all the financial risk it is my project. However, this is not my first rodeo. There is value in learning from someone who is experienced. Only you can determine what that is worth to you. Don't be cheap. If you have found a guy who can teach you how to add significant income streams pay him gladly and pay attention. This is not very complicated and not hard to learn. It won't be long before you can structure deals more favorable to you. After all, you will soon be the experienced party.