contractor and lender partnership help

[William Fisher]

Hi all! I am looking to get some ideas on types of partnerships that have worked in my situation.

I am a contractor with as small home remodeling business and can do just about any type of home repair, interior or exterior. I have been actively trying to learn as much as I can about investing in real estate and plan on making the jump soon by house hacking.

In the mean time me and an investor and friend have been discussing the idea of becoming a partnership and investing a flip property.

He knows more about the ways to purchase, has connections with lenders and banks. Has experience investing in rental properties, knows the area and potentially will be paying more of the purchase cost whether it be out right or a loan.

I have 10 years experience in every aspect of home remodeling, interior and exterior. Electrical and plumbing included. So i will be able to preform any and all rehab myself and if for some reason I can't do it I can find trusted competent tradesmen to do so. I can accurately judge the approximate costs of the rehab work and materials that will be involved. I live out of state but have flexibility to move and live in/work on rehab for expedited finish date.

Im looking for ideas on how to split the costs/ profits of the project if he were to foot the purchase price. If it was a loan vs an outright purchase of the property, meaning if he pays a % of the property vs the total price? Or if we split the loan or purchase price 50/50? How we spilt up the material or if he's covering the purchase do I cover the materials? Do we put a set hourlyvalue on my time that will be involved in the rehab and his connections and knowledge from past deals?

Any help would be much appreciated!

[Darson Grantham]

Hi William, as @Maryanne Cameron stated, if you can actually do what you said you can do, you are already better than 95% of the people in your business.

As a realtor, I work with contractors like yourself, and If i put myself in your shoes, I would find an investor that is capable and has plans of a long term relationship, not a one and done deal.  Many people will tell you they are ready to do many deals, but when the rubber meets the road, it is common they don't have the capacity. 

So find an investor that has the funds, bank connections, and processes in place.  Tell them, if they fund the deal with the bank, and the materials, you will bring ALL the labor and after the sale, you'll split profits 50/50.  You won't need to pay him any interest, and he won't need to pay you any wages for your work, those are each of your trade-offs.  

In this scenario, there is a LOT of detail that goes into the "how" part of this transaction and you'll want to do your research.

A different option would be for you to start talking to banks yourself and find one that will loan you money for the initial property purchase and then materials up to 80% of the After repair value.  Given you have the ability to supply the labor, you might be able to control the entire deal your self without a partner.

Again, there are MANY ways to do it, and what I mentioned above is just one way.  

But it is a start!  What questions do you have?

Also, as Maryanne said if you want to move, come on over to Des Moines, I'll get you more business than you can handle, IF YOU CAN DO WHAT YOU SAID YOU CAN DO as a contractor.