Partnering with contractor - how to structure?

[John Balan]

Hi all,

I'm looking to get started in REI and have a good friend who is a GC who has experience in flips and new construction. He had some personal stuff he went through that put him in a position where he doesn't have much cash. I, on the other hand do have money saved and good credit.

We discussed the idea of partnering together on deals where we would both source leads, I would bring the capital and credit for hard money lending, and he would be managing the construction/contractor side of things.  We both would be analyzing deals together. 

Does anyone have any idea how to best structure the partnership?  I feel that since I would be bringing capital and credit, I would be carrying most risk.  I don’t know anything about GC or fixing up properties, he said he can bring down the costs significantly since he gets parts and material cheaper. 

My question is how would you handle paying for the materials and labor, since I’m bringing capital?  And what’s a fair % split for each?  

I understand most investors don’t partner with a GC and typically hire someone to do that. But since we have a good relationship, he’s someone I trust and like the idea of giving a partner like that some skin in the game to be incentivized to get things done efficiently.  

Any advice would be appreciated!