Thoughts on JV partnership with GC..........

[Paul Costick]

Has anyone had experience creating a JV partnership with a contractor partner? I'm looking at a deal where I would find property, structure financing (looking at BRRRR) and be general point of contact for tenant. My GC partner would do initial repairs (at cost) and then any ensuing maintenance throughout lease term. My thoughts are this would lower initial renovation costs and also further maintenance costs as issues arise. To me, it seems a fair deal and my GC is getting an equity position for his labor costs (50/50 split). Please provide any pro's or con's you foresee... Or if there are better options than a JV partnership, I'd love to hear.

Thanks guys, Paul

[Jon C.]

Put EVERYTHING in writing and set time deadlines for each and every stage of the remediation work they are contributing. Institute strong incentives, either positive or negative (i.e., If they beat the deadlines they can earn more interest in the deal and if they don't meet deadlines their ownership percentages decrease).You do not want them to suddenly get a big job, and then your investment (and money) becomes their side project.

They MUST have some skin in the game. Do not allow their contribution to be only sweat equity. They need to have some decent money on the line as well.