flip with 3 people?

Question

Flipping a home with an investment from 3 guys, 2 of which have extensive background in construction.  All 3 people would be active in the rehab.

Anyone ever done it?  It would seem to be helpful, especially when everyone has a 9-5 job to take care of.

Jon Holdman · Answer

When you say "construction experience", do you mean 20 years as a general contractor?  Or, for the last 20 years they're occasionally done projects on their own house?  Are any of you licensed in any way?  If not, how are permits going to be pulled?

Right now, pre-project, you're all on good speaking terms.  I can guarantee that at some point, things will get tense.  So, spend time (hours and hours) talking through and writing down how things will work.   Who decides how to spend money?  Who's responsible for doing what?  What happens if more money is needed?  How will the money go in (who contributes money), how will the profits be split?  What happens if someone dies?  How will disagreements be resolved?  What, if any, effect does the contribution of labor have?  What if one person doesn't actually do any work.  What if one of the partners desperately needs money before the project is completed?

Take the point of view that you are all steaming mad with each other about some decision that needs to me made.  This document should give you guidance for how to resolve that.  What if your two partners want to do something that you are vehemently opposed to doing?  The document should cover how that's resolved.

Ryan R. · Answer

Jon is spot on, there will be disagreements and you must have an efficient way to handle them quickly.

Whatever you do, do not assign each of you titles like Executive, Judicial and Legislative duties. You will go way over budget, never get anything done and then China, I mean the bank will foreclose on you.

Justin Silverio · Answer

I second Eric N.'s remarks.

Eric N. · Answer

Taking on partners has many benefits and can make the difference in a deal, but the reverse is also true and can produce a huge pitfall. If you choose to go the way of a partnership make sure to put it in writing. A legal contract eliminates the gray area and spells out expectations and responsibilities of each partner. Money, or the potential of money, has the ability to change people. So even if your “partners” are family members or best friends talk to a lawyer a get a binding contract. Everyone will feel more comfortable and it provides you with some protection.

Manuel A. · Answer

I thought of partnering with family, but then thought of how much it would eat into my profit. I'd rather them be invested in me (ie, just give me capital and get a return on it) than them have the title of partner, which would make them feel more obligated to more money.

If you guys plan on each getting 1/3rd of the profit, look at it like this, if you decide to do it with no partners, you will triple your profits!

Sure, more work, but triple profits sounds better, maybe? I'm not in your shoes, so maybe it doesn't sound good to you, but still... I'm just throwing it out there :D

Or how about you employ your 2 other friends to do the construction if you trust them so you can have them involved, but just hold out on giving them the title of, "partner". Just let them be invested in you.

Curious though, do you plan on doing all the work yourself? Just wondering because whenever I'd see someone mention in the past something along the lines of, "I'll do the work myself" as opposed to just hiring others; I'm pretty sure it ended up with others saying it wasn't a good idea... That it was better to hire others.

I'm no pro though! Good luck either way!

Manuel

John Jabson · Answer

The problem with the three of us is that one person has 20 years of construction experience, the other has a few (3-5 years) and the last person has only 2-3 years of experience.  We would have to figure out how that would function properly together, as a group.

Robert Adams · Answer

Partnerships can be tricky. You need a solid plan that everyone sticks to and make sure you know your partners well if they are going to be involved in the deal and not just silent investors. Try to delegate duties  ahead of time so everyone knows what is expect of them including yourself.

Josh R. · Answer

I think I have seen a Property Ladder (TLC Show) where 3 guys tried to do this and only one ended up doing any work and completed the flip without the others who went back to their day jobs.

It can work but obviously depends on each individuals committment and how they work with each other. There also needs to be a clear cut method of decision making to follow otherwise stalemates can occur and delay the job. (Too many Chiefs not enough indians mentality)

flip with 3 people?

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