All Forum Posts by: Michael Moikeha

The split will work. The only question is your financing. Because you will be getting into flipping, most of these types of properties are not financeable, and you want to be able to offer your sellers quick closing and quick cash. When you are trying to finance, that is just not really a possibility.

Would you cover the repair costs as well, or is that on your partner? Usually an equity partner covers all costs and the working partner manages and does the work.

So if you only put in the purchasing costs, and he fronts the repair costs, then the equity partners 50% of the profits is split between all equity partners (And since your contractor would be putting money into it, he is part of that group).

Example:

Purchase at $100,000. You buy

Repairs at $50,000 Partner fronts,

Resale at $300,000

After fees etc a profit of $75,000

50/50 split puts it at $37,500

Since the equity partners had a 2/3 and a 1/3 split on investments, then the contractor gets 1/3 of that $37,500.

Final numbers, $50,000 for contractor, $25,000 for you. Since you invested $100,000 over 6 months or so, your cash on cash is still 50%, and you didn't have to do any of the work, thats pretty good. If you front all the costs totaling $150,000, and get the $37,500, you would still be making the same cash on cash, so it all depends on what you want.

Would you cover the repair costs as well, or is that on your partner? Usually an equity partner covers all costs and the working partner manages and does the work. 

So if you only put in the purchasing costs, and he fronts the repair costs, then the equity partners 50% of the profits is split between all equity partners (And since your contractor would be putting money into it, he is part of that group).

Example:

Purchase at $100,000. You buy

Repairs at $50,000 Partner fronts,

Resale at $300,000

After fees etc a profit of $75,000

50/50 split puts it at $37,500

Since the equity partners had a 2/3 and a 1/3 split on investments, then the contractor gets 1/3 of that $37,500.

Final numbers, $50,000 for contractor, $25,000 for you. Since you invested $100,000 over 6 months or so, your cash on cash is still 50%, and you didn't have to do any of the work, thats pretty good. If you front all the costs totaling $150,000, and get the $37,500, you would still be making the same cash on cash, so it all depends on what you want.

I'm investing out here in the hot Portland Oregon marker. I'm always interested in entertaining new partnerships and relationships. If this market interests you at all, let me know.

Keep studying. Look for deals always and tell everyone your looking for a house. If you find a good deal but are not positioned to purchase at the time, then you can wholesale it.

Good newbie logic. On this same note, you could always run deals through hard money when you are planning your acquisition and exit strategies, as well as looking for private money. If no hard money lending loans, take it as a sign and don't risk the money and relationship with a private lender which will be a great asset for many more years if you don't mess up on an early deal with them.

It depends on what's important to you. You mentioned that it is important that this project is socially responsible. Is that more important than the highest returns? If you didn't invest your money here and now but invest somewhere else, how soon would the pay off be and at what percentage? If nothing else is lined up, would you be better off sitting on your money instead of investing (for a profit) to create something valuable to society? Figure out what is important to you, what your needs are, and I would calculate the personal value in knowing you're doing something you're happy to be a part of.

Make yourself a regular on this site. Build a presence, offer value to those around you, and when you get a great deal, throw it out and see if anyone is interested. Find local REI groups in your area and join then and begin networking there as well. You can never network too much!

If you wont get the deal without the partner, I say be willing to give up to 50% of the equity. It is better to share the wealth than to never have the wealth because you wanted to keep it all for yourself.

Good luck!

I have done similar deals with JV partnerships. They took first position on the property with a note signed for the full amount of their investment. All this is done in escrow.

When we sell the property and it goes back into escrow, we can not get our payout till all parties agree on the split of the money. No one party got the money and then divided it up.

It was all done in escrow based on the agreements sign forming the partnership and the payout options in the promissory note.