I'm a beginner at real estate. I want to invest but I don't think I can do it by myself yet so I'm saving up more money when I buy a rental.
I have a friend that is looking for a cash partner. I can help him come up with the down payment and construction cost. I was just wondering how I will get my investment money back and how to calculate the profit split.
The house we're looking at is 95k. I'll come up with the down payment and closing cost.
19k - down
20,000 - construction
It will sell for 160k
45k profit
4800 closing cost (3% of 160k)
Now, we're calculating profit and we don't know how much we should give to each other.
It’s good that you’re starting investing! However, I still see a lot of miscalculation in your profit estimate math.
A few questions for you:
1. Are you going to hire a realtor to help you sell this property once finished? That’s 5%-6% commission fee.
2. What are the holding costs? Insurance, utilities, etc?
3. Is there capital gain tax that you need to pay in the state where the home is being renovated?
4. Consider city tax, county tax, etc when selling the home also.
5. Any seller subsidy you’re offering to the buyer during this market? Interest rate is at its peak right now and buyers are coming in low and asking for ridiculous number of seller subsidy.
Once all these or maybe even more are taking into consideration, then the final number will be your profit. You can obviously do a 50/50 split.