Profit sharing with the seller on a flip

[Carl Spear]

I have a question about profit sharing with the seller on a flip, specifically how to lock up the property.

I recently got a call from an owner of a single family home rental that came in from my direct mail marketing.  He said he had just had to evict his tenant and didn't want to be the landlord anymore and was ready to sell.  I met him at the property where he was seeing the place for the first time in five years.  Needless to say it was in pretty rough shape.  We were able to agree on a price that would make it possible to flip the property and then he offered something I wasn't expecting.  He said if I wanted to split the profits on the flip, he'd be willing to finance the repair costs.

Putting on my thinking cap trying to figure out how to save money not only on money costs for the rehab but also money costs for the purchase of the home, I asked him if he'd be willing to hold ownership of the home while we did the rehab which would allow me to save money by not having to get a hard money loan.  He said he'd be willing to do that.

My question is, how do I 'lock up' this property for the rehab and sale if I never actually purchase it?  Should I work with a real estate lawyer to draw up a profit sharing contract that spells out who will do what (maintain payments on the existing loan, pay utilities, manage the repairs of the house, etc.) and also how profits will be split?  Or should I buy the property subject to the existing financing and work it that way?  Is there some other way to do this I'm not thinking of?

My biggest concern is getting things in writing in some sort of a contract so he can't sell the place out from under me while I'm doing the rehab or once I'm done leaving me high and dry with no profit.  Granted he will be the one bankrolling the entire operation but I'll be out all of that time and work.