Central NJ · Member since 2020 · 7 posts · 2 votes
Hello, my name is Robert, This may have been answered, but I had no luck finding anything. I have private/hard money lenders I am considering using. I have been a GC/ contractor for over 30 years in central NJ so I have everything I need as far as the sweat equity portion of the deal. What I am lacking is the initial 20% ish, maybe less, I need to satisfy the lenders' upfront costs IE: down payment, points, and doc fees. etc. I am willing to work out a very fair split of the profits at the sale. If anyone out there does this kind of 100% lending for the whole project that might even work better, but I am not sure that exists.
Sure it is quite normal to do a 50/50 JV with one partner putting up all the money. I have done several of those as the money guy. I am certainly not "silent" though. Depends on how much I am needed. If the other partner is competent, I am more than happy to let him do his thing and be pretty darn silent. If I see something that concerns me, I am not going to be silent. I will speak up and protect my money.
To be bluntly honest, it would be a red flag for me that you have not built up and investment funds after 30 yrs as a GC. I know **** happens but it would make me question your business skills and dig deeper. Just being honest. My experience with GC's is they often just cannot manage money/costs. In a JV you need to be very transparent and thorough about documenting your costs so you can get an accurate "profit" number for the split. I have had several situations where I have caught my JV partner (sometimes a GC, sometimes not) sliding in extra expenses from his other jobs or even personal home into our project. To me that is a deal breaker. It is like cheating on a spouse. No trust after that and I am done. If you have an out of state partner it is even more important. If you are willing to be honest and transparent and competent with the budget, you should not have any issues.
Truly your best bet is to find a deal and post the specific numbers and what you are looking for...or take the deal to a local REI meeting and pitch it. If it the deal is legit, you will get lots of interest. Do a few JV's and build some cash and then look for better lenders. Also if you have ANY money to contribute that would help make a partner more comfortable on the initial deals. Doesn't have to be 20% or even 10%. But just putting SOME skin in the game tells us you are less likely to start the project, discover you are in over your head or it won't be profitable and ghost us....which happens a hell of a lot.
Since you've been a GC for over 30 years, I'm guessing you've already built up a solid network and worked with several investors over the course of your career. Why not partner with one of the people that you've done work for already? They already know your track record and will trust you.
@Paul De Luca I have never worked for an investor. I only worked for homeowners, through either my own advertising, word of mouth, or architects I worked for. I wish it could have been that easy, I would have gone with them first.
You're not likely to find a silent partner...first you could run afoul of security regulations but that's another issue. More importantly the scenario you're describing is really a 'Joint Venture' meaning partners...as in I have a say and vote in everything 50-50 because my money is making this a reality. I'm not saying you can't find someone to work with, just saying you need to look for something a bit different that what you're describing.
Matt, you're right. I meant more where they were more money, and less design. JV is probably the right way to go. I was hoping for little to no input on design/build decisions but that probably is difficult to get. Is it possible to get someone who would just put up that front money and take a high return on investment at sale?
Sure it is quite normal to do a 50/50 JV with one partner putting up all the money. I have done several of those as the money guy. I am certainly not "silent" though. Depends on how much I am needed. If the other partner is competent, I am more than happy to let him do his thing and be pretty darn silent. If I see something that concerns me, I am not going to be silent. I will speak up and protect my money.
To be bluntly honest, it would be a red flag for me that you have not built up and investment funds after 30 yrs as a GC. I know **** happens but it would make me question your business skills and dig deeper. Just being honest. My experience with GC's is they often just cannot manage money/costs. In a JV you need to be very transparent and thorough about documenting your costs so you can get an accurate "profit" number for the split. I have had several situations where I have caught my JV partner (sometimes a GC, sometimes not) sliding in extra expenses from his other jobs or even personal home into our project. To me that is a deal breaker. It is like cheating on a spouse. No trust after that and I am done. If you have an out of state partner it is even more important. If you are willing to be honest and transparent and competent with the budget, you should not have any issues.
Truly your best bet is to find a deal and post the specific numbers and what you are looking for...or take the deal to a local REI meeting and pitch it. If it the deal is legit, you will get lots of interest. Do a few JV's and build some cash and then look for better lenders. Also if you have ANY money to contribute that would help make a partner more comfortable on the initial deals. Doesn't have to be 20% or even 10%. But just putting SOME skin in the game tells us you are less likely to start the project, discover you are in over your head or it won't be profitable and ghost us....which happens a hell of a lot.
Eric, thanks for responding. I can understand and agree with what you are saying. I have no trouble being completely transparent with any questions you might have. Be it bills, personal questions, or anything else. As far as my funds, I never said I didn't have them, but I am trying to avoid using my own cash. If you want to have an offline discussion I have no issue explaining. As far as a silent partner I probably chose the wrong word. I just meant more of not wanting someone to micromanage and question every decision, especially about means and methods, or what color the kitchen should be. I hope this makes more sense. On the money side, I was looking for someone to put up the upfront cost, so I was thinking just the 20% upfront, for a cut of the profit, not a 50-50 spilt. I already have a hard money lender who will do 80% purchase and 100% rehab. With a pre-draw on rehab funds. The current project is a house purchase price of 300k. maybe less for an all-cash offer, rehab around 150k. ARV comps around 560k up to 590k.
Find a Realtor that works in this investment niche. If you were in the Austin metro area then I would surely like to meet you. Knowledge of the chosen submarket is critical so I think that you should be open to the color/style of the kitchen especially if it sells for top dollar quickly. Just my two cents!