Hi Everyone,

I am evaluating a new type of flip opportunity and I was curious if any of you have similar experience. I am looking at a partnership with a seller who owns a duplex outright in a very affluent area of South Carolina. The owner wants to transition the duplex into a single family home and then sell, but he doesn't want to finance or manage a renovation himself. The plan is for me to handle the renovation project and cost, and then take a proportionate share of the net profit after sale. After initial analysis the margins look very strong. My main concern is protecting myself, as I have no equity in the property and legally don't know what safety nets are available to make sure I get properly paid out on the back end. Has anyone done a deal like this in the past or have some guidance on how to prepare before commuting? 

I appreciate any insight you can give me!

Hi @Tim Coakley , this is an interesting proposition. It seems like you'd need to be able to file a lien on the property to have any sort of recourse or protection. If the seller has a loan on the property then messing with the ownership structure will be unwieldy, and if he doesn't you could propose that you form an LLC or some such, deed the property to the LLC, then the entity doc will determine how proceeds are split.

Occam's Razor will be a good guide here.  The simplest thing is likely going to be to find a way to earn through the renovation management.

Thank you Will! That's a great foundation for what I'm looking for.

Stay away!  Who is to say the rehab you offer adds value?  Really think about that..  

The only person that solidifies that is the buyer once the home is sold.  Your efforts may make the sale more attractive to buyers, however may not add value.  

Financing a rehab in hopes of selling a home and splitting profits with a homeowner is a huge red flag.  

An average homeowner wouldn't have issues selling his or her home for fair market value even without repairs.  Why is this person looking to improve then sell?  Just some questions for thought..

@Tim Coakley You have some extra flexibility with this once since he owns it free and clear. He really should quit claim it to an LLC before getting started just for liability sake. It's only a couple hundred dollars. Since there's no lender, there's no reason not to do so in this case. Then you could be added as a member of the LLC or you could be a 1099 employee of that company with some kind of JV agreement in place specifying the arrangement. Either way, if you are going to move forward, you should try to ask an attorney for their opinion on how to best arrange it. If you quit claim it into an LLC, you'll want an attorney to do that anyways.

Originally posted by @Tim Coakley :

Hi Everyone,

I am evaluating a new type of flip opportunity and I was curious if any of you have similar experience. I am looking at a partnership with a seller who owns a duplex outright in a very affluent area of South Carolina. The owner wants to transition the duplex into a single family home and then sell, but he doesn't want to finance or manage a renovation himself. The plan is for me to handle the renovation project and cost, and then take a proportionate share of the net profit after sale. After initial analysis the margins look very strong. My main concern is protecting myself, as I have no equity in the property and legally don't know what safety nets are available to make sure I get properly paid out on the back end. Has anyone done a deal like this in the past or have some guidance on how to prepare before commuting? 

I appreciate any insight you can give me!

 You could do a subject to transaction where the seller deeds you the property, you renovate and sell.You can also take a lien on the property but you need to make sure you are in first position. Make sure to run this all by you're attorney and have them draft any documents once you agree on terms.