How to Partner up an Investor and a Handy-Man?!

[Triston Murray]

Hello ALL BPrs. I'm here to brainstorm yet again and I need some advice as to how to structure a potential partnership between myself and a carpenter:

Here's the story:

My mom's ex husband is an extremely skilled carpenter, but he can also do pretty much everything related to electric, plumbing, drywall, painting; essentially if the roof and foundation are good, he can do 99% of the work.

He has done tons of high quality work for my mom, her family, and her neighbors, and he barley charges for the labor if he does at all.

The Question:

How would someone like me, who is business minded and has access to capital, partner with a carpenter willing to put in a ton of "sweat equity"? Both of our goals are to hold property for long term rental income. But I believe, in addition to acquiring property and rehabbing at a discount, we can also create additional income by establishing a small handy-man/ rehab/ contracting business with the money we save from him doing the work.

Specifically:

1. Is there a common or "boilerplate" agreement/ legal structure that would best fit the situation?

2. What's the best way to position the partnership for growth on both fronts; "in house" acquisitions and offering light to medium duty rehab services to the public?

3. Has anyone had experience in balancing capital contributions with sweat equity (in any RE transaction or partnership)? How did this work for you/ and what pitfalls that may come along?

[J Scott]

If all he brings to the table is contractor skills, then why not just pay him as a contractor?

By making him a partner, you have LOTS of new issues to deal with:

-  What happens if he doesn't do a good job?

-  What happens if he gets hurt and can no longer contract?

-  What happens if you guys have a falling out?

-  What happens when you need to pull permits for things like electrical, plumbing, HVAC, etc, and you have to bring in licensed contractors -- who pays?

-  What happens if he gets busy with other projects?

-  What happens when he needs more cash flow and you can't provide it with the "sweat equity" in your deals?

-  What happens when you disagree on the rehab scope or quality?

You should be paying your "partners" for what they bring to the table -- if they are only bringing contracting to the table, pay them for that (fixed bids, not equity).

If he's bringing more to the table than contracting, we'll need more info...