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Updated about 2 years ago on . Most recent reply presented by

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Kristian L Snow
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Operational Agreement for flipping properties

Kristian L Snow
Posted

Hello there! I'm new to the community. I was told this was a great place for this kind of question.

Context:

I have been a very successful handyman for 2 years, with a prior business degree & past history of running media projects. I have secured an investor to partner with me to buy & flip housing. He is doing it more out of goodwill to help me get launched as a house flipper than making max profits.

He asks that I be the driver of whatever arrangement we make, and I need to get an operational agreement together before big decisions are made.

Objective:

Looking for a good template of an operational agreement for a Partnership LLC where one is the investor, and the other is the manager/renovator. It would be based on the investor putting a property into the business as his equity, and the renovator earning his sweat equity on the back end. As protection from both parties, the company can dissolve or a member involuntary withdraw if there is negligence, failure to perform ect. At which case, the assets would be divvied based on member's equity (or is the term interest?)

The goal is for each person to get a percentage of the deal based on how much they put into it. So if he puts in a $200,000 property, and I, the renovator, don't do anything to improve the property, then upon dissolution I would get 0% if the company dissolved. If I put in $50,000 to renovate, then I should get 20% of the assets upon dissolution. 

Bonus: There will likely be a period of renting before selling. It would be good if the contract included a requirement that the renovator receives 50% of rental profits to go toward his equity share in the business. This way, the renovator 'earns' his way into owning his share of the company, giving him lots of incentive to profit the company.

I'm trying to find a template or set of templates to base from, so please don't stress out trying to make a perfect fit! I'm thankful just to see what is normal out there.

Most Popular Reply

User Stats

31
Posts
45
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Katherine Wiltse
  • Real Estate Agent
  • Ava, MO
45
Votes |
31
Posts
Katherine Wiltse
  • Real Estate Agent
  • Ava, MO
Replied
Quote from @Kristian L Snow:

Hello there! I'm new to the community. I was told this was a great place for this kind of question.

Context:

I have been a very successful handyman for 2 years, with a prior business degree & past history of running media projects. I have secured an investor to partner with me to buy & flip housing. He is doing it more out of goodwill to help me get launched as a house flipper than making max profits.

He asks that I be the driver of whatever arrangement we make, and I need to get an operational agreement together before big decisions are made.

Objective:

Looking for a good template of an operational agreement for a Partnership LLC where one is the investor, and the other is the manager/renovator. It would be based on the investor putting a property into the business as his equity, and the renovator earning his sweat equity on the back end. As protection from both parties, the company can dissolve or a member involuntary withdraw if there is negligence, failure to perform ect. At which case, the assets would be divvied based on member's equity (or is the term interest?)

The goal is for each person to get a percentage of the deal based on how much they put into it. So if he puts in a $200,000 property, and I, the renovator, don't do anything to improve the property, then upon dissolution I would get 0% if the company dissolved. If I put in $50,000 to renovate, then I should get 20% of the assets upon dissolution. 

Bonus: There will likely be a period of renting before selling. It would be good if the contract included a requirement that the renovator receives 50% of rental profits to go toward his equity share in the business. This way, the renovator 'earns' his way into owning his share of the company, giving him lots of incentive to profit the company.

I'm trying to find a template or set of templates to base from, so please don't stress out trying to make a perfect fit! I'm thankful just to see what is normal out there.

Hi Kristian, my name is Katherine and I do recommend hiring someone to structure your LLC. I hired Prime Corporate Services. You would outline these details and they would create an operating agreement, articles of organization and make sure you have proper designation. I personally decided to create a holding company in Wyoming (which functions as an umbrella LLC). I did this to give some anonymity and lawsuit protection (I know not 100%, but a lot more than a traditional LLC in the state I reside). I mentioned Pace Morbys name and only paid roughly $430 for the LLC and for the wyoming office. I then pay $10 monthly to have that wyoming office collect my mail. They can create a state local LLC for about $350 and then you don't have to have a brick and mortar service your LLC. I can explain any of these details more if I am being confusing. Good luck!
  • Katherine Wiltse
  • [email protected]
  • 417-349-5432
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