Hello, I need advise as to how to split my profits if i go into a partnership with my brother who is a general contractor. We are looking to buy a foreclosed home to flip and sell in as little as 6 months. I would be putting the down payment down on the house plus using my lowes card to buy all the material, he would be just doing the remodeling of the home. He says he just wants a percentage of what the house is sold for. Now we live in Connecticut and are looking into buying in the New Haven County Area, Basically buying a house that costs about 50k flipping it and selling for example 100k. If i put 20k down cash and put the rest on a loan and the material on a card, how much should his half be?
Please Advise I'm new to the House Flipping Business.
@Natalia Jimenez I would consider an 80 (you)/20 (brother) split in the beginning. This set up rewards the equity partner for the financial risk and incentivizes the general contractor to perform.
@Natalia Jimenez you really need to know the end goal. If you brother is going to Ben the contractor for 6 months and in the end you guys split $10,000 profit ($5000 each) you had your money tied up for 6 months but made $5000... your brother worked on this house for 6 months and made $5000. I honestly think its best to hire him for his price and you are the one making the "profit".
@Natalia Jimenez here is what I do. I pay for all the expenses and a reasonable hourly wage for the labor (as a 1099 worker). I set a threshold of $10,000 as a minimum profit. If we don't make $10K or more then no profit sharing. In my case I am paying out 10% as a profit sharing bonus - but never pocketing less than $10K. Example: we make $13000 in profit then the contractor get $1300 of that. So, they are paid weekly for their time and effort. They have zero skin in the game. But there is a big incentive to work quickly to keep carrying costs down, work smart on materials vs labor to keep costs down, and work well to make the finished product as appealing as possible. Works for me...
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