JV 50/50 split

[James Palin]

Hello Everyone,

I just need some clarification on the JV 50/50 Split and wanted to see what experiences people have had using this financing structure.

The money partner pays the purchase price and rehab costs and the real estate investor pays the closing costs.  All profits are split 50/50.

Is this pretty standard?  Any feedback is appreciated.

Regards,

James Palin

[Jonathan Godes]

I have done this a number of times on the funder side of the equation. 

Every funder (and I am finding every boots-on-the-ground flipper) has different "pain points" of what they want, or what they want to avoid. The 50/50 is a good starting point, but what really speaks to me as the money guy is all the other terms that YOU propose to protect me. That really speaks to your integrity and willingness to put you money where your mouth is. 

For example, what happens when the project goes over budget? Will you pay for overages related to contractor issues? What about finding mold or structural issues that couldn't have been forseen? Will you pay for any overages? Do you have the capital for that? 

What about if the house sits on the market for two months? A deal where the house sells for 20% less than you pitched me is the same to my pocketbook as if your contractor goes far over estimates. What is my compensation for having my money tied up for 3-4 months longer than you promised? 

Some funders will require a larger percentage of the deal, especially if it is their first time working with you. I am more about my annual ROI and what my downsides are and what you are willing to do to protect them.