Structuring Partnership as GC & Investor

[Lisa B.]

1st Rehab/Flip:  We are a GC and about to sign to purchase house with a partner. We are both putting in equal initial cash investment for purchase and costs (property taxes, insurance, utilities) for a  est.10 month hold. We will be funding the construction costs (materials/subs/our worker's pay). How do we structure the money/profits? Get reimbursed for costs after sale? Construction costs added to our investment therefore higher percentage of profit?  Partner is open to any method we choose.  

[William Harvey]

@Lisa B. you would simply add up all costs related to flipping the property....purchase price, soft costs, reno costs, sale costs, etc. and then whatever is left over you would split based on your agreement. 

For instance, if you pay $200k for the home, soft costs are $10k, reno costs are $50k and sale costs are $15k, and you sell the house for $400k, then you'd add everything up and subtract from $400k:

$200k - purchase

$10k - soft costs

$50k - reno

$20k - sale costs

$280k - total costs

You'd then subtract this from $400k and you're left with $120k profit to split however you've agreed to it. 

The cost of everything, including what you're paying your construction company would be treated as an expense. 

If you're looking for insight on what the actual profit split should look like, I'd need more info such as who found the deal, different roles you each have in the deal, etc. Hope this helps!