Should I partner with my Contractor?

[Chris Sills]

I have done a few small real estate investing deals that were very successful and I am looking to get more involved. I have a contractor I use for renovations and I have credit/cash for purchases. He would like to work together and split profits. If you have done this before.. is this a good idea or would it be better for me to pay him? Seems like it reduces risk on my end but also cuts profits in half. Thanks for your advice!

[Andrew Ware]

This is a complicated question.

The truth is that most successful businesses have multiple owners and/or employees. But you have to go into it with your eyes open. You need to decide what the partnership looks like while everyone is friends. That includes what it looks like when things go bad. What happens if the deal goes upside down, what if he stops showing up, what if you stop paying, what if he has other work and puts yours on the back burner because he can't get fired? Seriously, what happens if one of you dies? Try to come up with a fair way you both win in most situations and prevents one of you from hijacking it.

I would strongly recommend taking it slow. Come up with a plan to slowly move from a contractor to one with equity if it's mutually beneficial. And you may want to always keep the final say.