JV with experienced investor what would you do?

[Jack Yu]

Hi BP members, I'm planning to JV a fix&flip deal with a experienced investor, below are the 3 options he is proposing..I'm looking for advice if you are in my shoe, which option you will do without hesitation.

Purchase: $310k (included $20k wholesale fee)

Rehab: $80k

ARV: $500k

Potential profit after all expense/holding cost/paying hard money lender and etc: $70k

-My part: invest my own cash $115k-$125k depend on which option I go with below
-JV partner: project management for the rehab, his partner which is a broker do the listing of house once it is ready for sale. Does not put in any cash, his responsibility is managing the project from rehab to sale of the house. He is proposing the following split where he gets the most of profit since I'm passive investor (bring the funds only).
I want to know what others see as potential red flags?

Thanks!

In summary, there are 3 main options:

1. You buy the deal at $310k, ABC's wholesale fee will be baked into your loan with the hard money lender, and we do 60/40 profit share between XYZ Development (aka XYZ, my renovations company) and you/your company via a JV agreement. You would be sole member of LLC that owns property.

2. XYZ submits for loan with you and closes on property with new LLC. You pay $20k ABC fee outside of loan and we are 65/35 (XYZ/you) partners on LLC.

3. If you don't want to be on the loan at all and willing to pay the ABC wholesale fee at closing, you can be a gap investor to fund 1) ABC fee, 2) down payment on purchase, 3) first payment to contractor and 4) carrying costs for the duration of project. XYZ will form new LLC to purchase property. I can give you 25% of the profit either as a member of the new LLC or via a JV agreement.

In addition to everything mentioned above, on options 1 and 2, I am open to giving more equity if you are willing to buy it at closing. For example, if you want 20% more equity (worth roughly 20k based on projections), I would be willing to sell to you now for an additional 15k with all other terms remaining the same.