How do I structure a real estate flip business between myself and a general contractor?

Question

I own a couple of small cottages around a lake and have found a reliable contractor who has done substantial renovations to both (ie complete gutting).

We would like to get into a "find it / fix it / flip it" business together whereby I provide the funding and he provides the labor. We would like to structure it so he has some equity in the deal: Meaning, I wouldn't pay him for labor but he would have some stake in the finished project.

Has anyone seen a relationship similar to this, and do you have suggestions?

Thanks!

Answer 1

You won't find a contractor to agree to that, not in this market.

Contractors aren't going to wait until you sell to get paid.

If you don't pay them, they'll slap a mechanic's lien against the property so fast it will make your head swim.

If you cannot afford to pay them cash, you cannot afford to enter into that type of business venture.

Answer 2

You and he arrive at an agreement how it will work.  Then hire a good attorney to draft the document.  This is no place for "home done."

Answer 3

i did the math on this project 12 yrs ago; Those who followed my

math are rich, the ones who didn't...........are not.

buy, fix up and keep.  Keep and keep,.

grow a portfolio.  And buy small biz's with the profits as bizs return

25+%, where RE returns 12%.

every flpper i know of is broke

Answer 4

These deals are easy to structure.

You have to decide how much and what you think his labor is worth.

If you think his labor and your investment is worth 50/50, 60/40 70/30 then you should make the contract that way.

How much would he be involved. Will he be finding the properties as well as fixing them?  Would you be finding them and doing the due diligence as to what is profitable, the sell price, how the sale is constructed, would you be carrying some of the sales price in order to make the deal work.

These things have to be worked out.

Once you have decided this then you may make an contract to please both parties.

You might want to hire an attorney or some other legal expert to assist in drawing this document up once the main items have been agreed upon.

Just don't allow the attorney to put a lot of legalness in the document that make it unworkable.

I hope this has been of some use to you, good luck.

"FIGHT ON"