50/50 partners...What?

[Ashley Wolfe]

I just emailed a remodeling company asking if they act as GCs on house rehab projects.  They come highly recommended and are a Five Star Rated (by Home Services Review) company. 

My email said, "I'm a RE investor in the area and I'm actively trying to form my rehab team for the winter season. I'm looking for a company to work with that will provide me with one point of contact for 100% of the cosmetic rehab of the properties I purchase. Since I don't have time to interview GCs, I'd like to know that SOWs will be managed and executed on time without me having to manage assorted sub-contractors at different properties.  Would you be able to work with me in this way?"

Their response was, "Sure we can be single point of contact with hundreds of resources at our disposal to handle a large array projects on time. 50/50 partners is our acceptance." 

What does that last sentence mean?  I'm not sure if that's contracting lingo or not.  Thanks!

Ashley Wolfe

[John Ellis]

This is common with inexperienced flippers. The issue is: Yes you have the capital and yes you "found" the property but the reality is you can not complete it without a team. Most posters and people will tell you the team is made up of a realtor, money person, etc. but the truth of the matter is that the most important member of your team is your contractor. They will be able to tell you the reality of you home. Finding a qualified contractor is the single most important part of a real estate flip. If the deal is good the money will find you but that does not mean a contractor will. I have been apart of over 45 flips as a contractor and as an investor and with that comes relationships. My relationships just as your capital comes with a price. A quality contractor will get you the best price for cabinets, flooring paint, etc. You don't have to shop at all the stores because the contractor already has the "stores" Most quality contractors don't use Home Depot or Lowes for most of their stuff most use dedicated vendors who's relationships have been built over a number of jobs. A quality contractor will deliver not just on quality of work but also quality of material used. As a contractor my value to your deal is more then just my quality of work. It is the quality of product. 

A 50/50 means the contractor is expecting because of his value he is bringing to the deal 50 percent of the net profit. Contractor will bring no capital to the deal but what he/she will bring is a bounty of knowledge, an array of vendors and a peace of mind you can't find on craigslist. 

I would not do a deal involving a flip without at least a 50/50 deal. I wish more people valued contractors. Although I love this site for answering questions it does an injustice of valuing the people who actually complete the flips. There is the 70 percent rule, the spreadsheets, the numbers, the whatever but when it comes down to it the most success comes from finding a qualified, quality contractor that delivers.