Deal Structure Ideas for Flips

[Jeff S.]

My investing partner and I are about to start on what we hope is a  series of flips, in a town about two hours from us. I am very familiar with the area, and we will be partnering with another experienced flipper/investor (Brent).

Ideally, its going to work like this. My Partner and I will be buying the houses using a line of credit we have, at 6%. We will fund the rehab. We will give some input on floor plans, decor, etc. Other than that, we are just the money.  Brent, will be finding the deals, closing them, general contracting, doing some of the labor, and ultimately selling the house.

We have found the first house, and the numbers are roughly as follows: 20k purchase. 30k rehab. 100k sale.

My question is, how would you all structure the deal? We have discussed something like, after all expenses are paid (including Brent's labor), we get 20% on our money. In this case, that would be 10k. That would then leave 40k profit. I'm thinking we would then split that 50/50 between our private investment company and Brent. How does that sound? Suggestions? 

I really want all parties involved to win, and to incentivize everyone to want to do multiple deals per year for as long as the market will bear.

[Aaron Hall]

Some great advice that I have heard is to make it a win/win. Work with your partner and come up with what works for both of you.

If you want to work with this person on future deals talk about what will make it work for both of you.

The best tool to use for negotiations is talking about value added. What value does each party bring to the table.

Up front communication will lead to a more successful deal and better relationships.