I live in the Waco, TX area, and am looking to flip homes here locally in the McLennan County area. I currently run two businesses here in town, and time is my perishable commodity. Flipping doesn't sound like a great idea if I've got to do it all myself.
Enter a high school friend who has opened his own construction business. I have enlisted him to be my project manager/work some of the project himself.
Our Agreement is verbal in nature only. I will provide 100% of the financing (most likely through leveraging a bank loan), handle acquisition and analysis of target property, and sale of the property. While his end would be to oversee the rehab of the project, make sure we stay on budget, finish within time frame allotted,and help to mitigate cost with his expertise. However, he would not be financially tied to the property. My partner and I will split any profit 50-50.
My question(s) for the forum is, How do I make it to where he is obligated to finish the job? Is there some sort of a contract I can ask him to sign? Would adding his name to the ownership of the property when acquired work? What avenue would you pursue in my situation to not over-leverage myself in regards to the partnership?
Other Pertinent Information We do not have any properties in play. None of my money is currently at risk. My back up plan would be if he bailed on the project to rehab, refinance, and it and turn it into a buy and hold property
Thanks for your time, and any feedback is welcomed and appreciated.
I will state first see an attorney who is experienced in putting together entities.
In the operating agreement is where you are going to want to put the accountablity issues front and center. If it is black and white spelled out as to who will do what then if a partner doesn't hold up their end then legal stuff can be done at that point.
Bottom line if the trust isn't there even if you know the person then you need it in black and white. Any partnership you do in this business should be in black and white to cover each person. I have heard advice that it shouldn't matter if it is your brother, sister, someone you trust implicitly verbal agreements are easy to get out of and when money is on the line and being risked agreements should be in black and white.
Hope that helps!
Thanks for the advice sir. I will definitely seek out an attorney, and educate myself on operating agreements. Much appreciated.
@Dan Henderson This has been brought up couple of times, learn to use the search bar. Here’s the bottom line:
No financial risk to partner = no motivation = can pack up his tool bag and leave.
No contract can secure yourself and your investment when it comes to this type of partnership - there are too many what ifs and what to do on that if.
Best case: Hire him as contractor, pay his invoice, move to the next deal.
Thank you for the reply, it is very much appreciated
Dan from Uncle Dan's?!?!?
If things don't work out with the guy, my cousin and I are putting together some deals in Waco right now as well. You're very generous to offer 50% for someone who is just a project manager. If you'd like a better arrangement, let's grab a Big O and chat sometime.
You are correct. Dan Jr from Uncle Dans BBQ. This would be my first house flipping business venture so I thought I’d give him some incentive to partner with me more than the accepted distribution.
I’d love to get together sometime and talk with you and your cousin. Plus a Big O always hits the spot. Let me know when you’d want to get together.
Uncle Dan’s catered my wedding and I am about to go pick up a smoked turkey from there. I’ll take a loaded Texas tater any day!
I am also looking to invest in the Waco area. I have lots of time, motivation, and access to good contractors but not a lot of capital. I’m interested in buy and hold primarily but would love to flip some properties to help fund the acquisition of buy and hold properties.
Have you attended any of the REIC Meetups at George’s on Speight? I believe this to be the only RE Meetup in Waco but it is well worth your time!
Waco and the surrounding areas*
Hey@Dan Henderson , I sent you a PM and have a great Attorney who is also a BIG RE Investor.
@Robert Pfenninger There is also a meetup in Temple and we work a lot with the Waco meetup in which we are also a member of.
Temple Meetup> https://www.meetup.com/Masterminds-of-Cen-Tex-Real...
Thanks for the kind words. We truly appreciate your business! My next step was to start attending the local meeting (as the podcasts recommend nearly every week) it is good to know where they are at. Will definitely check it out, let me know if you want to get together sometime to talk shop.
Thanks for the links to the meet ups. It is definitely appreciated.
@Dan Henderson , would love to go grab a coffee or a beer sometime and talk RE.
Vern, will be seeing you at the nest temple meetup