Idaho Investor / Spec Home Builder Partnership Structure and Recourse + Questions

[Lance Miller]

I have an opportunity to partner with a custom home builder in Idaho. I met with him to go over some details and it left me with some questions. 

I came in thinking I would buy the lot cash and this would be my contribution to the deal. I also thought I would be able to receive the buying of the lot commission and selling of the house commission as a licensed agent in ID.

First, the lots are not listed, so no commission on the buy. Price is 270K for 1 acre lot.  Also, builder signed an agreement with the developer that only allows developer's hand picked agent to sell the home when complete.

During the meeting I asked about recourse and deal structure and I have read some things on here and other places that there are tons of ways to structure this. 

Builder has relationship with Builder's Capital (hard money construction loans), BUT they will be taking first position lien on the land, and I would have a second position lien. BC loan has no payments throughout the build. 2 points and 10.99 interest from what I know so far.

Construction loan would be around 890K. Land is 270K. Target house list price would be 1.5M.

1. I'm having a hard time understanding that I will put up 270K and it will have a first position lien by BC and I could be wiped out entirely if the build or the market implodes. Is there any way around this? Any scenario where construction loan does not lien the property? Non-hard money loans?  Specialty programs?

2. Split would be 50/50 of net profit on the deal. He said his markup is transparent and has things like 10K superintendent fee. Warranty fee and things like that totaling around 50K. Everything else is at cost. I was willing to do this when I thought I would be receiving buy and sell commission (best case scenario ~53K). Would you still do this deal knowing I have no ability to sell the house? I don't want to be greedy. Just wise with hard earned capital.

3. He has to buy 3 lots. First one is done with an investor. They have no agreement of anything on paper. Freaked me out to hear this! This deal (ours) would be contract and legally sounds. If I do it: LLC with he and I? Should I purchase and title land in LLC? I have read doing JV will create liability for me with anything that can go wrong on build. Construction worker dies on site, I become liable? What is the best structure knowing the setup?

4. Anything I am missing or should be away of that I may have not thought about?

Thanks!!