Property owner agrees to get paid after flip is sold

1 Reply

I have an owner of a free and clear Dump. He agrees to an as is value of 225k and agrees to enter an agreement that he gets paid after the property is rehabbed and sold. He wants 1/2 the net profit for holding off on his 225k.

It will take me 300 all in to get it done. So together we will have a gross of 525 in.

ARV is 650k. After I sell he gets his 225, I get my 300 back and we split the 125k profit minus closing and commissions - call it 50k - so we split 75k.

Does anyone know how best to write this up? Also, if the economy tanks and we have to dump it for cost, I would want to write it up to share the loss.

@Joel Gibney

On the face of it this does not sound like a good deal. Investing $300k to split $75k is not a very good return - this is also assuming that nothing unexpected comes up causing the rehab costs to increase and the market holds level. Maybe for your market this is typical, but even in the SF Bay Area I would not do this. 

I would re-evalute this, maybe run it by some local investors in your area and see what they say - roundtable it at a local real estate meetup or REIA.

Just my 2 cents. Best of luck. 

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