Hybrid flipping idea - You do the flip / you and owner split profit

[Daniel Ryu]

Hi BP..

Just wanted to see what people thought of this idea:

Problem - Out of state investor OR someone who has a different primary resident wants to sell home but has deferred maintenance to the tune of 30 or 40K. 

OWNER doesn't want to go through the hassles of a flip to get full market value due to lack of experience or other reason.  

YOU don't have funds to purchase of the house. 

YOU think the house is worth 140K as is. YOU think after rehab, it could be worth 220K. 

YOU suggest - YOU will pay for rehab and sell house for the owner. 

YOU and OWNER agree that after sale, you will split proceeds like this:

OWNER will receive first 140K. Then YOU will receive cost of repair for flip + 10K. After that, whatever is left, you split 60/40 in OWNER's favor. 

Pro: OWNER is guaranteed a minimum amount for house + the opportunity to make more

Pro: YOU can get the benefits of a flip with a lot less out of pocket money. 

Anyone ever do a deal like this?

Is this a good type of deal structure? 

And to protect your investment as the one paying for the rehab, what about asking the OWNER to place title of house in your name in return for a LIEN against property for the first 140K in the OWNERS name? 

If anyone has input, I'd like to hear it. 

[John Santero]

That is my business model!! I have done several very close to those same parameters. I even partnered with a Church (their rectors house) and ended up making them more money than what they would have made if they sold it to me cash.

Always use the low cash, higher if you owner finance strategy - your cash on cash returns soar when they option for the latter.