Joint venture with seller to fix/flip

[Samuel Beshara]

Hey Guys,

I know some people have discussed this before and didn’t really get a clear or positive answer.

I wanted to get more information on if I were to structure a deal where the seller keeps paying for the ongoing costs, I fund and complete the rehab, then we sell and workout a percentage of profits.

They talk about this and specifically with Jared Holland on episode 341. He calls them “free houses”.

How are these deals specifically structured? Does anyone have an example on what it looks like? For example, do I go on the deed for the house, how am I protected if something happens, etc.

Positives: don’t waste time and money closing on house twice. If I can only afford to do renovations and not the acquisition. Since owner still owns house, demo can start next day.

Thanks!

-Sam

[Brian Pulaski]

First you need a solid attorney who will create an air tight contract for third.

If I were to do it the structure would have to be agreeing to the “value” of the house now. Let’s say $100,000. There would have to be an agreement on how much gets spent to renovate, even before the work happens. Let’s say $30,000. Then the work gets done and both parties get their investment back (seller gets that agreed to $100,000 back, you get your $30,000 back). Closing costs get taken out and the remaining needs to be “split” to some agreed amount.

If you sold the house for $200k after, and had $10k closing costs, you would end up splitting $60k. An agreed 50:50 would give you both $30,000...

This is very basic and there are TONS of details that need to be addressed (rehab overages, who pays utilities if the rehab triples the electric and heating bills, who insures it, who pulls permits, what happens when seller doesn’t want to move and you don’t agree on how much “you” deserve to let them not move).

I wouldn’t do it unless it was a no lose homerun deal.