Partnering with contractor-Question for flippers..

[Dakota Cooley]

Question for you successful investors. Sorry if it gets a bit lengthy.

I am an investor/realtor, and I've been looking to ramp up my flip game. I have a meeting set up tonight with a contractor who I have used twice now. He asked me how he can I start doing what I'm doing, so I saw an opportunity and proposed a business partnership. He agreed it would be a good idea. 

Now my question is - does anyone else here have this sort of partnership already? I have an idea of how I'd like this meeting to go, but I wanted to see how you structured-or would structure-this business relationship.

We briefly threw out ideas of how the general structure would be, which was I find these deals, bring money partners to the table if need be, and he and his small crew do the work before I re-sell it.

Any tips on the finer parts of this partnership though? Such as pay structure for materials, profit sharing, amount of time spent at job site, cut labor costs and he pays subcontractors with profits, him bringing money up front too, etc??

 Any information would be much appreciated!

[Ray Foley]

I have dealt with the legal side of these types of arrangements a few times.  The key is working out a proper incentive structure. J Scott is right, Even when these deals are done right and they work out you will end up paying a larger percentage of the total to your contractor. You should however be paying at-cost, or less for the work done which lowers your risk of loss if the flip is a dud and depending on your finances and the capacity of your contractor can allow you to operate at a higher volume.