What are good Partner Terms for a flipping job?

[Sergio Sifuentes]

Hello BP community! 

I found a HOT deal (a flip opportunity) and I'm planning to partner some one. My proposal will be the following one:

I will put 20% down of the investment and take care about all the work with my GC. My partner would put the other 80% of the investment and we Split the profits 50/50.

**Note: I guess is important to mention that this will be my first flip but I'm doing it with a 15 years of experience GC of my trust.

Q1 - Does it sound like a fair deal?

I guess we will need to sign a contract that includes the exit strategy that protects both parties  and all that. To write down the contract and have it reviewed by our own lawyers it will take time and this is a HOT deal. 

Q2 - Can we lock down the deal with out our contract signed? 

Last but not least:

Q3 - What is a good exit strategy for a flip and partnership like this one?  

[Jeff Copeland]

I've done it both ways, and personally I don't like partnerships - especially ones where I'm doing/funding/overseeing all of the rehab work.  In my opinion, the 80% partner who is not doing any labor and taking half of your profit is the one coming out ahead.

Hard Money is much cheaper (it rarely consumes half of your profits). 

As to whether you can lock down a deal without your partnership in place - It really depends on where the cash is, who's going to hold title, and how your partnership is structured. All the seller cares about is that Buyer ABC submitted an offer with Proof of Funds showing that Buyer ABC (not Buyer XYZ) has enough liquid cash to complete the purchase. So, you'll need to decide how you're going to structure your partnership and pool your funds.

Your main exit strategy will be to sell it and split the profits after rehab, financing, and holding costs. But you may also want to include options that allow one partner to buy out the other after the rehab is complete (this can be a great way to pick up a property with significant equity if you're the one buying, and/or an alternative way to exit the deal if the market shifts or the house just isn't selling for some reason.

Your agreement should also address who needs to carry liability and homeowners insurance, and lots of other nuances.