First time investor needs advice
Glad I found this site. My name is Steve and I am 32 years old. I currently own a wholesale company for autos and powersports. I am looking to get into home flipping. I have a contractor buddy who approached me with the idea.
Heres the facts.
I am the investor (money guy) Cash in hand. Going to finance all the house and repairs from my own pocket.
He has a small construction company and is somewhat slow on work at the time. Himself, part time brother and friend that work for him.
What he proposed is this. I buy the house. I buy the materials. I pay his guys unmarked up salary (1100 per guy which is $2200 a week for both workers) plus $800 a week for him. Thats $3000 a week for him and his 2 guys to work on the house that I would pay weekly at the end of the week. In the end we do a 70 / 30 profit split the larger portion me.
Ideally I am looking for someone to take the risk with me. In this scenario he assumes no risk. They get paid and if the house doesent sell its me holding the bag or taking a loss.
Ideally I would like to find a contractor who will do the work and take a share in the end. That keeps more money in my pocket and gives me a larger buffer for a safe zone. If it all goes wrong well at least we both lost something not just me. He cant afford to front the guys money and not make money until the house sells so he wants the weekly money.
Whats my money worth? Should I charge to bring it to the table?
He wants to get total junks for like 100k and fix them and remarket them for 190k. I more or less want to buy properties for 150k+ that need paint and trim and do them myself stuff that someone lost but didnt thrash or maybe someone ran out of time and the bank took it and sell them for $190k I would make less money but wouldnt have to split it. These are just examples not exact figures you get the idea
I am a handy person. Like I said I repair vehicles, boats and such so I am very hands on and very capable. I also have construction equiptment that I own myself (bobcat and excavator) that I could do yard work with or septic work etc.
Please tell me your thoughts. I am tossing the idea of doing business with him or also the idea of doing it myself. Please let me know what you think is fair and has worked for you in the past as far as a profit share in this kind of scenario. Thanks in advance.
Originally posted by Steve S.:
... As far as the plan goes right now I am attending some auctions in my area to get an idea of what properties sell for as well as checking out lots of houses on mls in the same area to better my idea on pricing. ...
I am going to assume that the auctions you are planning to attend are either sheriff sale or trustee sale auctions. If that is the case, then you will want to spend some time reading the links at this next thread:
http://www.biggerpockets.com/forums/41/topics/68977-foreclosure-auction-sheriff-sale-and-trustee-sale-faq
You won't find those terms in NH, @Steve S - although the principle is the same.
You'll find mortgagee foreclosure auctions, usually by power of sale, not judicial process, and by now you probably know each one is at the particular property, not on the courthouse steps.
There are also no tax lien sales or tax deed sales in NH, the municipality files a tax lien, or takes the property for taxes, but by statute can it can only go back to a municipality. They have to own it past the redemption date and then list it for sale. They typically do that through MLS or another normal real estate auction (not a foreclosure auction) by one of the normal auction houses.
I'm only chiming in because terminology varies from state to state and I didn't want you search for trustee sales in NH
Just a quick course, anytime a contractor tells me I have to pull the permits a red flag goes up and I start looking for a new contractor.