San Diego, CA · Member since 2015 · 77 posts · 22 votes
Does anyone have experience or advice about offering to do a flip as a joint venture with a seller of a SFR?
I'm proposing that if the seller is willing, we get an appraisal for the market value of the property as is, and then let the owner continue to make mortgage payments while I renovate. Then when we sell, get back my renovation cost and split the profit with the seller.
This would cut down on my cost of money and turn a reluctant seller into an enthusiastic JV partner.
Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
8y
I imagine with the right buyer and a solid contract/expectations it is possible.
My biggest issue would be the appraisal. I bought a flip that had just received an appraisal. He valued the house at $160,000. I bought it for much less and had to put close to $75k into the renovations. It sold for $250k giving seller concessions. In your scenario, after closing costs, my deal would have netted nearly nothing. Appraisers seem to give an estimate of current value at retail prices (if it's a $200k house and needs $20k in work, it's worth $180k). Investors buy houses for much less then its retail value minus the cost of the work, it's where the profit comes in.
Just an angle to keep in mind, as your deal may never get off the ground from the start, and whoever paid for the appraisal would be out that money.
Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
8y
I imagine with the right buyer and a solid contract/expectations it is possible.
My biggest issue would be the appraisal. I bought a flip that had just received an appraisal. He valued the house at $160,000. I bought it for much less and had to put close to $75k into the renovations. It sold for $250k giving seller concessions. In your scenario, after closing costs, my deal would have netted nearly nothing. Appraisers seem to give an estimate of current value at retail prices (if it's a $200k house and needs $20k in work, it's worth $180k). Investors buy houses for much less then its retail value minus the cost of the work, it's where the profit comes in.
Just an angle to keep in mind, as your deal may never get off the ground from the start, and whoever paid for the appraisal would be out that money.
Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
8y
I’m sure it could work, but there are a lot of murky details.
- Who sets the sale price? What.if he wants to sell it for less than you think it’s worth?
- what happens if it sits on the market for a while?
- what happens if after renovating, he wants to stay?
-What happens when the buyer’s inspection turns up an $8K sewer issue (or whatever) who pays that?
-Who decides what renovations to pursue? To what level/quality!
-what if he doesn’t pay you? You can’t put a lien on the house at that point.
You can of course contact around some/all of those items... but many are just based on a good continued working relationship, which as we all know in business can go south when you least expect it.
Hayward, CA · Member since 2009 · 258 posts · 62 votes
8y
If you are a contractor and license it is doable. If they don’t pay you can put a mechanic lien on there Home.
Agreement I say, you front rehab cost and get paid after Home is sold or set cost for repair.