Flip Investor/Contractor relationship split

[Steven Satterlee]

Hey everyone-

I have a partnership questions, I just purchased a home to flip. Here's the scenario:

I am the Realtor/Investor (all cash)

My contractor partner is going to act as the General for some items (plumbing/electrical/HVAC/Roofing/garage door/carpet) and will do the other work himself(roof tear off/siding/5 windows/exterior trim/interior trim,minor interior framing/1 full bathroom rehab/, ect.). He brings no cash to the table.

He also will hire a general laborer to help him for $10/hour and want's that to come out of the total rehab budget. This general laborer will help him with anything needed plus cleanup.

He will also be hiring for landscaping, fencing, and final cleaning.

We will be hiring a designer to help with colors, staging company to stage the home and I will run numbers to re-list.

The house was built in 1925, it's 960 sq. ft, Purchased for $76,000, ARV $125,000-$135,000. The rehab cost will be about $25,000, this doesn't include the cost of his labor. Our anticipated profits after all numbers are accounted for will be between $20,000-$30,000.

Our tentative split will be 50/50. So $10,000-15,000 each.

Numbers are kinda slim but it's the first one.

What are your thoughts. Is a 50/50 split good? I feel like it's more than generous on my part since I worked on the acquisition, am the investor (all cash which helps pad the numbers a bit) and will be the listing agent.

Any input is greatly appreciated. Thanks so much!

[Tyrus Shivers]

@Steven Satterlee

It seems that your numbers may be short.

Using either 70% or 65% and your purchase price is too high, but those rules do account for other expenses you may not have by paying the cash yourself and working as the agent.

I will use the lower end of your ARV for a conservative estimate.

.70x125000=87500-25000=62500 which should be your maximum purchase price. Your purchases price is 76K

What is the labor charge? Is he not charging labor at all? What about the 10hr guys? Even if he is splitting profits, I would like to know his labor charge. Did you account for surprises in your 25K repair assessment. If it can go wrong, it will. I like to budget 15% or more if the house is a wreck for surprises.

If we use just basic subtraction then 125000-76000-25000= 24,000. That 24K does not included any fixed costs which will drive your profit lower.

Deal is too slim for me, but any profit is a success if it is not a major headache.

I will partner with contractors to do deal, but the numbers have to work for everyone at least a 20K split is more ideal for me.