How to structure a flip with a JVP???

[Corey Davis]

I posted this in the "Pro" section, but that crowd doesn't seem to be super active right now, re-posting here to see if anyone has any ideas.

I'm considering a JV partner on some upcoming projects, and have not partnered with anyone outside of my circle of contacts before, so some advice on how to go about this would be great!

Normally I fund a flip one of two ways:

Purchase the property using a HML, and rehab using my own funds,

OR,

Purchase the property and borrow the rehab funds all in one loan from my HM lender.

Obviously using my own funds on the rehab is ideal, saving me 20% on the rehab, but I find myself lately with more than one project going and can afford to use loaned money, reserving my own cash for the inevitable emergency, or in the case these days, for another opportunity.

When I fund the project 100% on a HM loan, I'm usually under 65% ARV for the total loan, and at 15-20% financing. My average deals now are 200-300k purchase and rehab total. So far the average rehab amount is 30-70k.

I have an ad going in the marketplace, and have made some great contacts, (thanks bigger pockets!) and now I would like to know how experienced professionals structure a deal like mine.

I will use my actual numbers on my current project for an example.

Property was purchased at 240. Estimated rehab is 60. ARV is 450. I have six months under contract with my lender to complete the flip. (More than I need, but if I hold the property until September/October, my agent is estimating an increase in interest and a potential for bids in the 475-500 range.). I know that's an interesting topic in itself, I will start another forum post for that shortly.

My situation is this: if I foot the bill on the 60k rehab, I tie up funds I could really use to start another project I have coming up. But, if I include it in my HM loan, it adds another 12k onto my losses, and I have to deal with the invoice clearance and inspection procedure to get my rehab funds.

If I partner with someone who puts in the rehab funds up front, I can actually save myself some money by utilizing a crew that I normally couldn't afford using the HML system, increasing my chance of making this flip work the way I want, and allowing me to utilize my own funds as a safety net and/or start another flip.

Kind of a great deal, huh?

Sooo....

How do I structure it so my rehab partner and I get a fair deal? What kind of contracts have people used? What's the best legal structure to use? I currently operate under an LLC, would I include this partner as a member of my LLC? Or do we start a new one? I already purchased the properties, should my JVP put a lien on my properties for his protection? Is there a legal issue of some kind with paying a percentage of my profit as his ROI? Or paying him a percentage on his investment?

All advice, as always, is very much welcome and appreciated!