Need some opinions about a deal
I've got a deal that I'm working on that I am thinking of creating a joint venture we a wholesaler/investor that has a property under contract in Texas.
I'd be putting up the money which is basically around $120K ($80K down so the seller can move plus about $40K in repairs.)
After the repairs and the sale of the property, we'll be paying the seller another $95K.
So basically $215K all in although I just have to come up with $120K.
The joint venture partner did a great job finding this property and negotiating a guaranteed sale price of at least $400K. If we get less than that amount, the difference will be deducted from the $95K that we owe the seller.
For instance, if the house only sells for $390K, we will only owe the seller $85K.
The joint venture partner will also be managing everything that needs to be done with the property (i.e. finding and managing contractors) because we're both out-of-state. I've never done an out-of-state deal but I don't think I'd be more difficult than doing a deal in my own backyard.
They're also a licensed real estate agent in their home state so we might have them also market and sell the property. However, I'm a little hesitant to do this because I'd always prefer a Realtor with knowledge of the local market.
What I'm trying to figure out here is what is a fair balance when splitting the profit of around $185K?
Normally, I'd expect to pay about a 5-6% wholesale fee on the price I'm essentially getting the property for ($185K.) Which, in this case, the wholesale fee would be around $8,750-10,500.
But the joint venture partner will also be managing everything else and I do want to do future deals with them.
So, what do you kind folks think is a fair deal?
Double a typical wholesale fee? 20%? 50/50?
Should it be less if we hire a Realtor to sell the property?
I'm leaning to 25-33% of the profit but I definitely don't want to run the risk of insulting them.