Starting a rehab company with your GC

[Mike Pastor]

Hey Folks,

So I am in the planning phase of creating a construction/home improvement/contracting company that will work on my rehab projects exclusively, offer services to other local investors, and offer services to home owners as well.  

Anybody here have a similar partnership/arrangement with a general contractor(s)?  I'd love some input on how you structured the partnership/relationship.  

     -Do you have a partnership in place? 

-Percentage of ownership for investor?  Percentage for General Contractor?

-Performance based bonuses for the GC?  What's fair?

-Best way to protect yourself (as the investor) from liability?

Etc.

Thanks,
Mike

[David Sohn]

Mike - I'd suggest thinking about starting small with your contractor(s) with the intent to grow together.  But maybe see how the first 1,2,3 projects go first before entering into a longer term contract.  You'll learn what works what doesn't and both be prepared to make adjustments.

We partner w/ two separate GCs (two separate geos).  We found best way to motivate is to have both get a % of profit from the project - which is their incentive to finish the job as quickly and as cost effective as possible since they now have skin in the game.  There's always room for improvement, but works well!

My .02 on the best way(s) to protect yourself:

1) make sure you have a great insurance policy (or policies)..talk to a pro on that one.  This alone is worth its weight in gold!

2) Make sure your GC is licensed (if needed by your state) and insured -- if he/she is hiring subs make sure you understand who's responsible for ensuring the subs are licensed/insured as well.

3) Think about if you enter into a contract with a GC if you are going to own this business together or both as separate entities forming a 3rd new entity...definitely worth thinking about the corporate structure here to protect yourself.  Could be worth discussion w/ a lawyer.