Flipping house business

5 Replies

Hello,

I would like to start flipping houses as a family business. We want everything to be in writing to avoid confusion. I am a realtor and would be investing and listing the properties, my dad is a handy man that will also invest and will oversee the rehab process. We have a cousin that is an electrician and has reserves to buy and rehab properties.

How would I set it up to where I get paid regular listing commission, my dad would get paid for his labor like updating the kitchen bathroom or floor.( we would hire a GC for the heavy lifting) and the same with the cousin if electrical work is needed.

Any advise would be greatly appreciated.

Thanks!

I'd set up the business as an LLC, which would define the capital each party would put into the partnership the work each party will do and the ownership each party will have of the partnership. The ownership shares should reflect how you want decisions to be made. If one person will be making the decisions then they should have over 50% share. It is really dangerous to have a family business where everyone has to agree, in order to get something done. Someone needs to manage the business and be in charge.

Then, I would write up an operating agreement that puts down on paper how each player gets compensated for their work.  (Dollars per hour, competitive quote before work begins... whatever you want).  This does not need to really be a legal document, just an agreement that everyone signs that sets the ground rules.  Then when there is a disagreement you can all go back to the original agreement that everyone has. 

Then just run the LLC as a business and pay people based on what you've all agreed to.

My two cents. Two companies. One Real Estate LLC Company (flip houses) and second company as a General contractor (GC). Your cousin can service your Dad. Do not risk family relationships, when your cousin is ready and confident include him on the LLC. Start between you and your Dad. The GC might need Licenses, insurance, etc. segregate liabilities. I agree with Mark in regards to the operating agreement. Be wise on the Profit definition.

Originally posted by @Freddy Alban :

Hello,

I would like to start flipping houses as a family business. We want everything to be in writing to avoid confusion. I am a realtor and would be investing and listing the properties, my dad is a handy man that will also invest and will oversee the rehab process. We have a cousin that is an electrician and has reserves to buy and rehab properties.

How would I set it up to where I get paid regular listing commission, my dad would get paid for his labor like updating the kitchen bathroom or floor.( we would hire a GC for the heavy lifting) and the same with the cousin if electrical work is needed.

Any advise would be greatly appreciated.

Thanks!

Once you decide on compensation, capital contributions and rolls etc. make sure to run everything by an attorney first as they will make sure you cover everything in that could go wrong. 

The best way to structure things are to hold the property in a separate LLC where all of the individual partner entities are the members. Everybody would have a written contract with the partnership LLC that owns the property. You would have a listing agreement everybody else would have construction contracts for their roles based on current market prices in terms of compensation.

Bottom line make sure everything is in writing and signed off on by your attorney

Thank you so much for your input! 

These are great advises and have definitely help me see things clearer.  We will start with just my dad and I as we gain experience we will consider including someone else in the picture.