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Updated over 11 years ago on . Most recent reply

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Harry Hylan
  • Rental Property Investor
  • Richmond, VA
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Questions on Sweat Equity deal ?

Harry Hylan
  • Rental Property Investor
  • Richmond, VA
Posted

I have a friend with a 2 family home here in NY and they are struggling not only with the mortgage or bills but with upkeep and improvements. I have entered into an (verbal agreement ) That I will receive aprox. $2400.00 upon turning the rental apartment and $300.00 per month as long as the apartment stays rented and I handle any maintenance issues with the property. as well as 3 projects 1. new roof 2. new siding 3. finish the basement. They have been a good friend and very trustworthy and I am not worried as far as payment. However they are not in the best of health and should something happen I don't want to rely on the good will of her immediate family. any suggestions on how to protect myself. I'm looking at $300.00 per month less vacancies plus the owner pay for all materials and any helpers I may need. I appreciate any advice the BP universe may have. Thanks in advance

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Colleen F.
  • Investor
  • Narragansett, RI
4,380
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Colleen F.
  • Investor
  • Narragansett, RI
Replied

Have you thought about a contract that lays out the long term arrangements ? What I thought when I saw your arrangement was you are doing work upfront for money on a regular basis and down the road. The maintenance may not be a big thing because it sounds like you are looking to help them out and you would be compensated monthly so I would expect the routine activities would be covered. For this something like a property manager agreement would work.

But the big jobs like a roof. If the deal terminates right after you complete a major activity like that where you have put a lot of hours in how will that work? You may need to structure it in a more complicated way that specifies a minimum amount you will be compensated for these major jobs. If you do the roof you are entitled to x months of this management fee. Also you need to consider what if someone decides to not rent the apartment? what happens to your compensation? If you do this it needs to be carefully thought out.

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