Raising Private Money for a Flip

[Kelley Schneider]

So I am licensed in CO and am starting to get into actually flipping property. I have a client I've done some deals with (he flips houses) who has done very well and is on board with me getting more skin in the game. I have a deal under contract that he is going to finance 100% for the acquisition ($96,000) and I'm actually going to manage the flip--hire the contractors, decide what needs to be done with everything, paint colors, flooring, etc. I'm trying to figure out how to structure this so we're both happy... Comps are strong at about $116-$134, and walking through my contractor (who I've used on a ton of projects in the past), we anticipate we could turn this thing for no more than about $7500.

Keep in mind I am a broker, but I'm not brokering this deal. What I was going to propose to him was that we both are on title to the property, he'll wire the money in straight to the title company on the day of closing, and on the back end, we split the net profit 70% to me and 30% to him (even playing around with 60/40 which I think is more appealing to him, and I'm ok with). It's a small deal and worst case he makes about 5% on his money in no more than a 3 month period of time, best case he makes about 11% (which, again, is net after acquisition, cost to flip the property, real estate fees, etc.)

And yes, I'm fairly new to this so I am open to any and all suggestions on how to structure this.

Thanks!

[Anson Young]

I wouldnt touch that deal, mainly because no properties I've worked on in the last 3 years have needed only $7500 in work. Even carpet/paint/refresh jobs go over that.

50/50 is pretty common, but if you can get more, then do it. I also wouldnt do this deal as the money partner for less than 50%, either!