Buying Rental Properties as a General Contractor, with Partner.

[Jesus A Jaimes]

Hi BP,

I am hoping someone has advice for me, as I have combed through forums/videos and I cannot seem to find advice FOR a General Contractor looking to buy rental properties. Everything I find relating GC's is on how to deal with one, with nothing on how to leverage your resources as an existing GC to be part of a deal. 

I have already acquired, fixed up, and rented my first investment property (SFH), and even assisted my girlfriend in getting a good deal on a home, fixing it up, and house hacking it. But I want to go the way of being the active partner (finding the deal, doing the work to close the sale, supervising any work needed, etc.) in a portfolio of rentals. In other words, contributing the majority of sweat equity and little to none of the cash.

I have also successfully completed over 15 turkey rental renovation lump-sum contracts for Investors, though my primary focus is B2C remodeling and custom work, as the profit margins are just better. So I have the experience to do this, I just rather take the haircut on Gross Profit for myself where I can make it up with Equity and Cashflow on the back end.

I have a variety of people interested in working with me in this fashion, I just have no experience in structuring a partner deal for this kind of work. One of them is actually my girlfriend who is interested in being the 'property manager' on the back end for any rentals we acquire. She has personal savings and access to retirement funds that can be used to buy a home. I've also got someone with access to personal savings, pension money, and VA loans. In the case of these two people, they also have great credit and can easily get a mortgage on a home as well.

So I was wondering if it would be possible to go the route of getting an LLC/Operating agreement set up, having a partner purchase a home with a mortgage, and quitclaim deed it into the LLC? Or would we all have to be on the mortgage? I also understand the home we'd be looking for here would be lendable/living condition in order to get a mortgage, we'd only be updating finishes and repairing as needed.

Alternatively, I imagine we'd set up the LLC, fund it up front and then try to buy a home through the new entity. I'm hoping to avoid this route as I want to retain cash on hand for any actual repairs or improvements. In the future I might like this to get something cheap with a cash offer and fix up as needed.

Ideally I want to get equity as the person who finds the deal and puts it together, and in the interest of retaining a competitive advantage, perform improvements needed as a Cost-Plus arrangement where I can cover my Company's COGS and Overhead. This would also remain in place for rental property repairs needed (Cost-plus or a fixed rate for repairs).

Thanks in advance,