Building a home in north Dallas/Fort Worth

[Stan Hill]

We have several rentals and want to take a next step of building a home to sell. So far we have spoken to one builder, with him offering to build a 1,500 s.f. home, 3/2/1, all brick, 9' ceilings, nice fixtures for approximately $112,500 including the lot and basic front yard sod and a few plants. The lot is prices at $15,000.

I called their references. One was a lawyer, her number was disconnected. However, it was two years old and the lawyer web site said she was licensed for 47 years. I'll assume she retired. The second was from a city councilman who spoke highly of the men and had a home built by them. The contractor is licensed in the city we are speaking of. I am pretty good at watching reactions. When I asked the lady in permits about him, she immediately knew who he was. I sensed no dissatisfaction. I also chose not to ask her personal opinion as I doubt she is allowed to give it anyway. At any rate, he seems to check out.

Anyway, here is the situation. He has stated their usual procedure is they can guarantee me a profit of $10,000 per $100,000 spent. After that, the profit is split three ways, the CPA-type of the deal, the onsite guy and myself. I am planning to call some other builders this coming week, but thought it would be interesting to get feedback on this arrangement from people here. The numbers seem to work out to my satisfaction even if the ones presented are a bit optimistic, i.e. the house sells for $135,000 instead of $145,000. Is this splitting of profits "normal"?

Any insight on this venture will be greatly appreciated.