An Operating Agreement of a Different Stripe, on our First Deal

[Mark Smith]

We have our first property under contract. Pretty sweet deal, 147.5 PP, 165 rehab, 450 ARV......we waited till we found a deal with a healthy margin, so when "things happen" we will still be profitable.

Haven't been able to get financing because we can't put skin in the game, so we gotta get creative.

Our plan is to talk to the seller about doing seller financing, with the seller paid their interest (and the principal, of course) when the property sells post rehab.....so that would take care of the seller.  

Question involves how to make it work with the contractor paperwork-wise.  We want the contractor to pay for the entire rehab upfront, with an agreement that the contractor will be paid in full, with interest, when the rehabbed property sells (my wife/partner knows the contractor from way back, so that's why we think we have a shot at convincing the contractor to do this).  Now, someone told me that I could create an Operating Agreement detailing the arrangement with the contractor, the idea being to give the contractor confidence that everything is on the up and up, and he is adequately protected.  However, when I searched online for "Operating Agreement," "Operating Agreement for Real Estate," etc., all I came up with were Operating Agreements detailing the structures of LLCs, and other agreements involving the trucking industry........not relevant stuff.  Has anyone heard of an Operating Agreement that would do what we're talking about doing with the contractor, or something similar? 

Thanks for your input, we are definitely open to ideas.