La Crescenta, CA · Member since 2013 · 18 posts · 0 votes
I am looking into flipping a house with one other person. We will both be bringing in money and be doing renovations. What type of agreement should I put in writing? Where can I find a sample one?
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
12y
You have two basic options.
1. Form an entity either LLC or S-Corp (best for this situation would be an LLC with S-corp tax election) - check with your CPA as I am not one. Within the LLC is an operating agreement and your RE attorney should draft this. DO NOT use some store bought operating agreement or use someone else's without having it looked over by your attorney before using it.
2. Each of you take title as tenants in common using each of your own entities and then use a joint venture agreement (JV). This too should be drafted by your RE attorney.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
12y
You have two basic options.
1. Form an entity either LLC or S-Corp (best for this situation would be an LLC with S-corp tax election) - check with your CPA as I am not one. Within the LLC is an operating agreement and your RE attorney should draft this. DO NOT use some store bought operating agreement or use someone else's without having it looked over by your attorney before using it.
2. Each of you take title as tenants in common using each of your own entities and then use a joint venture agreement (JV). This too should be drafted by your RE attorney.
La Crescenta, CA · Member since 2013 · 18 posts · 0 votes
12y
Thanks Will! You are very close, I actually hold me RE license in Valencia.
I would prefer to consider a JV agreement in this scenario. What do people that flip houses with different investors on the regular do? JV with each investor?
Also, my current broker does not allow agents to list their own properties. So my name being on title would be an issue. I would prefer to put title in my partners name (he is funding about 75% of the deal). Otherwise, I would have to switch brokers to agent the deal on both ends.
La Crescenta, CA · Member since 2013 · 18 posts · 0 votes
12y
Once the flip is sold, how are funds split? If only his name is on title, how does he pay me my portion of the profit? Personal check? How does he claim the expense and myself the income?
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
12y
Every deal is different as are investors so the JV agreement would change per deal, however, once you have one drafted, most of it is transferable between deals, simply plug in the new info and any new specs as needed.
If you flip homes, you should not have them vested in your personal name but your entity name. No idea why your broker would not allow you to sell your own investment properties, perhaps you should find a new broker.
If you are not on title, then you need to protect your interests by recording a deed of trust against the property. Do NOT take profits from the partner outside of escrow. If you don't get paid, you have a big problem to deal with.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
12y
If you don't switch brokers (in this case it may be good as I would not want to be with a broker who is not investor friendly being an investor) your easiest circumvention here is to be the "lender" on the deal and record a deed of trust and the partner being on title. You could then list the property and represent at acquisition, doing it all while securing your cash investment and profits via the deed of trust.
Since you are in California, I have found the forms on First Tuesdays forms disk( do a google search) extremely helpful to use as a starting point for many of my transactions. I then customized them as needed and have them reviewed by my attorney. It saves legal costs to review documents than to have them draft them from scratch. First Tuesday is CA specific.