Contractor/Investor Partnership

[Patrick T.]

Hey BP Nation! I posted this in legal and got no response, so I'm re-posting here.

I'm a General Contractor who has worked with several investors where they buy the property first and hire me to rehab. I quote the job, take deposits, get paid on a schedule like any other large job.

I also spent a number of years as a licensed Realtor, and I'm ready and able to locate properties that are prime for rehabbing.

A couple of these investors have an interest in partnering with me wherein I would locate the property, negotiate the purchase, do the rehab, and get it sold. They are just cash partners. I'm willing to do that if they will give me a minimal draw to pay my bills during the rehab phase, and give me a materials deposit. (naturally I will pass my supplier discounts through). But I can't afford to put in sweat equity AND finance the materials as well.

I know this concept might surprise many who think the contractor should play bank too, but it isn't going to work that way here.

What are your thoughts? Sound fair? What type of equity split in the end? What would the partnership agreement look like? Thanks in advance!!

[Paul Jamgotch]

@Patrick T.

I'm trying to get on the other end of this type of deal. It sounds like you bring a lot to the table but aren't bringing any cash to the deal (100% of risk on the person that is "only the cash partner"). For the first deal I would consider funding purchase, close, carry, and rehab costs (subs and materials) to split net profits 50/50 with a GC if I had a 1st lien on property; however, I would not pay you for personal bills or your labor if that's what you meant.