How to fairly split 1st flip?

Question

I have been approached by a a friend who is also in real estate on a flip that he will have under contract today or tomorrow to be a financial partner. This is an out of state property in Texas in a city he currently holds property. We are in the process of doing due diligence and are discussing how we should split the costs\profit. Being that it is his deal and he would be using his contacts in the city I believe it is probably fair that his split be slightly higher. Hoping to get some feedback on what the 'norm' is or what you all are doing in your deals.

The total cost to purchase, rehab and sell is ~$140k. If we split the costs(70k each), using his contacts(broker, contractor, handyman, etc) does a 60/ 40(my share) split on profits seem reasonable(profits estimated at 30k)?

Thank you in advance for your feedback.

The total cost to purchase, rehab and sell is ~$140k. If we split the costs(70k each), using his contacts(broker, contractor, handyman, etc) does a 60/ 40(my share) split on profits seem reasonable(profits estimated at 30k)?

Thank you in advance for your feedback.

Dorothy Butala · Answer

@Dan P. why not act as the lender instead of being a partner?  You can negotiate a rate of return (and points if you so choose) for your money, and negotiate the time frame your friend will have to repay the money.  You will be protected by being the mortgagee on the property, so that if anything happens, you can foreclose on your friend (sounds horrible, but could happen) and then sell it on the market to recoup your money since when the property was acquired for the flip, it is being purchased at a discount.  Just a thought.