Partnership with a Builder

[Ryan C.]

I am starting a new spec build and was looking for feedback of what a good builder/investor partnership deal looks like. I purchased the land and will supply the financing. I paid for a set of custom plans. A few builders have offered to do the project at 20% market up on materials and labor,  asked for a $15,000 management fee paid weekly, have guaranteed completion in 7 months or less, and would participate in 50% of the profit at sale. This deals seams unbalanced and much to favorable to the builder. I would propose the builder to do the project at cost and we split 50/50 in the profits, or if the builder wanted to make money upfront through and take a management fee we split the profits 60/40 (60% would go to me). Is this unreasonable? Keep in mind I am not asking for a return or development fee on the land. Thanks.

[Greg Parker]

Find a builder that will do the 50/50 split when the property sales.  Be sure to be very specific on the definition of "profit".  A friend of mine built and sold about 12 houses one year for a "financial backer" for an agreed 25% of the profit.  Should have been a nice check for about $120,000 at the end of the year.  Well, the backer ended up saying there was "no" profit after he took out all of his expenses(new truck, new car for his wife, a few business vacations, office expenses, etc.).