Flipping Fairly Profit Percentages

[Lee Stidham]

Hello all. I am a small contractor who wants to begin flipping houses in my area with my brother and another contractor. As this is my first venture, (and theirs) I want to make sure the agreement we make is fair before considering any properties. 

Here's the situation: My brother, who works with me, will get a mortgage for the property, make the house payments, and live at the property while we rehab it. I will fund the labor and materials costs in addition to weekly paychecks for the three of us while the work is being done. The third man is an experienced contractor whom I have worked with for many years and I trust him completely. He will oversee the day to day operations, material acquisition, inspections, etc. But he will not contribute any money. His experience, which is far more vast than mine, is definitely something I value, and I feel it is needed. 

We all work together doing remodeling, painting, decks, etc. so we trust and rely on each other as family. So my question is, how do we split the profits evenly according to each of the three partners?

Thanks for any thoughts, advice or suggestions. Lee

[Curt Smith]

Hi Lee, I suggest you need alot of flipping education.  Being able to do the work is far from knowing how to evaluate what is a good deal.  For example you are often if not 100% of the time you can not buy a flip prospect house with a std bank mortgage because a wreck that has profit in it (very VERY low price) can't be financed with a fannie (bank) mortgage.   You buy wrecks with a hard money loan.  Which FWIW is much easier to qualify for.

I suggest you buy and all of you read BPs books on flipping;  J. Scotts how to flip book and his how to estimate rehab book.  Yes I bet you'll learn a ton from Scotts book on estimating rehabs even though you are in the business.  :)

The hardest part is finding prospect houses that have profit in them!!!!   Please forget about hiring a buyers agent to find listed houses!  I don't know where you live / work, but in Atlanta 99% of flip houses are bought through wholesalers or direct by you doing the door knocking yourself.   IMHO fixing the houes is the easiest step.

Please jump into your education;  how to find deals,  Most importantly how to evaluate the deal, how to negotiate and close.  Since you will be creating product for typically Millenial buyers, you need to learn design; what do they like;  paint color, cabinet style, how do you move walls to maximize a house's layout... etc.

Join your local REIA to meet other local expert old timer flippers. They are in local orgs called REIAs. Google, also search in meetup.org "flippers meetup" or "wholesalers meetup"...

Best to you.