Partnering on a flip

[John Morgan]

I'm thinking of flipping houses with a builder/handyman. I told him if he could find good off market deals, I would finance the rehabs. I told him I'd be interested if we could split the profit 50/50. But all I am is the money guy. My wife won't let me do this unless I promise her I won't work on it or be away helping him. I just finance it. Then we'd take 24% off the profit for taxes, subtract all the expenses and divide the left over profit 50/50. Anyone see any red flags with this? Or have done something similar? All the risk is on me since I'm putting the properties in my name or LLC. This guy already found an off market property for a great deal in an upcoming area that I like.

[Henry M.]

John,

There are many concerns... Let me preface that I don't know the handyman. 

First, is the handyman providing 50/50 in expenses such as materials and payments.

Next, define handyman. If he's going to be the one to do all the work himself (which I doubt), the holding costs will eat into your profits. No offense, but he has nothing to lose.

I'm presumming he will be paid as well along the way...

Even if you could get everything financed and incorporate the purchase and rehab, there will be issues. I guarantee it. Meaning, there will be things you find that you won't expect.

What about permits?

Is he licensed? What recourse if he isn't and something occurs post retail sale?

What work is he expected to do?

What is his skill set?

You mention builder... Is he a General Contractor? Is he Licensed and Bonded?

How are you going to solidify this partnership? Through handshake (or elbow bump), Joint Venture, etc.?

Who are you going to pay if he has to get third party sub-contractors?

Are you paying them directly? Or are you paying him? If him, what's to say there isn't a double dip or increase for profit?

Who is going to buy the materials?

Have you seen his work? As in all aspects of his work?

Look, to be frank, it is very concerning to place yourself in a compromising position especially, if you're not involved.

Eventually, good workers will not show, you will be chasing him, he will most likely try to do other jobs in addition to your project... At first he'll be there five days a week, then it will be three... You'll light a fire under his *** and give him your "Any Given Sunday" speech talking about "inch by inch". Then he'll start working five days a week with weekends off, but then he'll start showing up for a half a day or just a couple of hours... Now your project is taking three to four times longer to finish.

How will you monitor this? Will you visit? Have cameras?

What happens if he gets sick or does?

How much is it in your area to hire a skilled worker? Pay by the day, hour, or project?

Again, is it possible? Maybe.

Is it worth placing your trust into one person?

Nope.

Best case scenario, he is the greatest handyman on earth. Time is of the essence! Not to mention, work has to be permitted... Otherwise, if they (Code Compliance) catch him working without permits, they will shutdown the project. Not to mention, a buyer or Realtor (buyer's) can check with the city to see if permits are pulled. 

Even if he does the work perfectly, they (CC) will not see that it was done to code and neither a potential buyer. How about pictures of the progress of rehab? Nope. It still won't justify the process.

I hate to be the Petty Roosevelt of this post, but trust me, I've been there.

Just my two cents and believe me, there's more on the subject.

Please VOTE if this made sense or touched your heart in some special way. 😂

from SAN ANTONIO, TEXAS!

"Big" Henry