Setting up a Home Flipping Partnership with Contractor & Realtor

[Khalil Ghorbani]

Thanks to everyone in advance. 

I used to flip home with a partner and we were just based on percentage of how much money we put into the house. I no longer work with him becuase he doesn't want to do it anymore so I have been talking to my brother in law who is a realtor since he has been wanting to get into flipping. We also spoke to another friend of ours who does contract work and could handle all the rehab with his father. So right now we are in a bind to figure out how this would work in terms of percentages because everyone is friends and we want to structure it right so we can grow. Below is a breakdown of what we would be bringing to the table.

1. I would be bringing lets say 100K to the table, handling the business side of things such as taxes, entity, bookkeeping etc at the moment since I live out of state. 

2. My Brother in Law who is a realtor would be bringing in about 175K to the table. He would also be looking for homes for us to flip as well as be the selling agent when we went to sell the house. 

3. Our third friend and father would not bring any money to the table and do all the contracting work on the house and finding all the sub contractors as well as do some of the work they can do themselves but not get paid for the labor aspect of their own work. We would be paying out the subs directly etc. 

So I have been trying to think about how to structure this deal. I think that the realtor should get the money on the buy side of the house which doesn't really effect us. But I thought that on the sell side that he should not be paid on that side becuase the time he is putting in as the realtor is the same as me putting time in to do paperwork and keep the books, and the same as the contractor not getting paid for his time in exchange for a % of the company. 

I feel that if he values his time and gets compensated for being on the sell side of things then that means everyone should be compensated for that time. Am I wrong to think that way? I am okay with the realtor having more percentage since he is bringing more money to the table as well as doing the realtor aspect of it, but it should come out of profits and not out of the sell price of the house. We would pay for the percentage of broker fees, photographer and advertising but not that commission. 

If he presses that he wants the commissions since he is there working on things and I am out of town etc. how should we structure that? He would only be taking 2% instead of the 3% to start.

We want to use our friend as a contractor instead of pay someone else because we want to help him get into flipping and making money without having to put anything in. 

I would really appreciate some insight on what your thoughts are about this and what would be the best way to do it.