Rehab Partnership

[Itay Heled]

Hi BP members!

Here is a short story with a  key question.

I am based in Toronto and invest in few rehab properties in  Kansas City MO.

Since I am  far away, at certain point I start using the local  real estate agent I was working with  as my ``boots on the ground`` . he got nice commissions  when I bought a property,  nicer commissions when I sell , even offered to pay him some percentage of net profit in the back end to supervise rehab for me . 

I was planning to do 10 flips per year and was working exclusively with him.

I thought to myself : 

I can trust him . After all he works with Keller Williams. seems like a connected  experienced  guy who knows the market, and above all,  he has all the reasons in the world to make things work, do a good job and make me happy. 

I was dead wrong...

At some point agent  encourage me to work with a contractor he ``knew for years and trust 100%``. I followed his advise and sign with them to rehab two properties.

 As soon as I  sent  $50k for the renovation contractor pretty much disappear.

later, contractor confess in writing `that agent asked them to use my rehab funds for his own rehab properties, promise to pay it  back when he is done and fail to do so. (that is at least the contractor version.most likely they commit the fraud together). 

needles to say,  I didn`t see any of my money back and had to sue them.

Now, my question moving forward is this:

If I am to get into a JV on rehab with a local partner (as cash investor) , how can I protect myself from similar scenario?

Thanks!

Itay

[Evan Wiesner]

There are a number of companies who can do that. Vineyard Services, Alacrity, Knipp Contracting, Asons Construction etc. Look up a couple and do some due diligence to see which one you think would handle your projects well in that area. I don't know which ones have a footprint in KC already but I'm guessing more than one.

These are all former property preservation companies (for the most part) that built networks of contractors helping banks secure and clean up properties before they were listed as REO's. The natural progression was to use those same contacts to actually build remodel networks, and some have made the transition better than others. At the same time, not all of their national coverages are equal so you have to learn who is good in your market.