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Updated over 5 years ago,

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Steven Colt
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Investor Contractor Structure

Steven Colt
Posted

Hello BP,

I am a contractor in Nashville, TN and we generally focus on residential remodeling. Over the past few years we have completed numerous renovations on SFR flip houses. Several of the homes have been typical joint ventures with private investors where we provide the labor and expertise at a significant discount, and the investors fund the project (acquisition/rehab cost). Our ‘profit' comes out of the sale of the house after final costs have been tallied. Hence, it is in our best interest to get things done correctly, efficiently, and cost effectively.

The private investor deals have been one-time arrangements on a single project. We don’t have any long-term agreements. This has worked fine, but I’d like to put together some full-time property investors to create a pool of funds that would allow us to have more than one property at a time under construction. We currently have access to manpower to scale up to handle more than two projects simultaneously. I would prefer to have one close to completion before beginning another. Then have the funds available to secure another property and repeat the process.

The market in this area is fast paced and we have had to pass on some good deals recently because we did not have the capital on hand to close quickly. We do have some cash to put forth, and I’m looking into alternative lending options. But right now, I just don’t think that we would qualify for the dollar figure I have in mind to make this concept fly.

I would like to get more feedback on what investors look at when considering partnering on properties. Would investors generally be happy with a 10-12% return? Or should I expect something higher? Other than positive ROI, and other obvious matters, what are other concerns/objectives would an investor have?

Then there are all of the business and legal issues to address. I have discussed this concept with some business professionals and my CPA. I need know exactly how a relationship like this would be structured. Would an LLC with all involved as partners work? Would there be any conflicts with REIT regulations? I don't know. Is what I am considering a normal arrangement in the world of RE investing? I know what you are thinking… but I'm not quite ready to consult an attorney. I'm just trying to figure out the ground work so I can proceed in the proper direction. FWIW, I just purchased the M. Faircloth book and hope that provides additional insight.

Too many questions in my mind at the moment and I’m probably over complicating things.

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