Flipper/Rehabber · Lexington, KY · Member since 2016 · 74 posts · 14 votes
Hello, I have been flipping full time for a couple years now and now have a successful business doing it. Recently I hired an employee who is acting as project manager and also does a lot of the repair work himself when needed. He has mentioned that he would be interested in helping fund some of my flips in exchange for a split in the profits.
I currently fund the majority of my flips with my own cash and can use a hard money lender if needed and I really don't see any advantage of taking him on as a partner, but I may be viewing it wrong. I can borrow money from a HML for around 12%. If I partner with him I will likely be splitting everything 50/50 and I would lose a lot of money by partnering with him. I also don't want to lose him as my project manager because it has been very difficult to find someone I can trust and he is very trustworthy.
Is there a way you have been able to make partnerships work for a flip when you don't need help with funding?
Rental Property Investor · Modesto, CA · Member since 2014 · 102 posts · 35 votes
7y
Depending on how many projects you do, you might want to bring him in on a project once or twice to see how it goes. You might be able to do more projects, and like you said you don't want to lose him as a project manager. Good employees are hard to find. Also, if you say no to him, he might go out on his own, and become your newest competition when trying to buy properties.
Property Manager · Columbus, OH · Member since 2017 · 123 posts · 76 votes
7y
Agreed with @Andrew Faukner. I have thought about this as well in the past with a good contractor. Where I would start is offer 1 project and split 50/50 where you do the financing and he throws in the labor. Some contractors dont like that idea b/c they would rather be for sure paid then risk the outcome of the sale and how much profit is actually made. If your contractor is interested in that risk then share it with him. In the end, the perfect outcome would be that he made more in his 50% of profit than you would have paid him and you made roughly the same as you saved on his labor costs and should have netted a larger profit with that not part of your cost structure.