Profit sharing with contractor in your business?

[John Ma]

Hey guys, I'm currently honing my business model. The current contractor i just partnered with I have a lot of confidence in continuing to do repeat business with. He has shown interest in becoming a REI as well (even though he already is but doesn't realize it).

We have had talks about building our businesses together but havn't come up with any real proposals on how to.

I was thinking something along the lines of if I lock down the deal (at my cost), he would have his guys rehab the full turn over (at his cost) and we would split the profits.

Has anyone tried a relationship like this? If so, did you end up going back to Investor - Contractor relationship or continue the true partnership relationship?  

Likes/dislikes?

[Deanna McCormick]

I'd check more posting on BP for this you'll find several.

But overall if you choose to do this, factor in costs for property insurance, property taxes, and utilities for time house is in work.. I'd find someone a worker bee, or family member that would agree to rent a room so you could claim expenses on it as soon as possible.

I did a flip with someone I put up cash for the house,, we were to split profits,, he was to do the work, I would pay for all materials. I set up a draw format for him so he'd have some funds while working but, his idea of work was not the same as mine, he hired subs for elec and plumb, and their costs ended up higher than the original bids by quite a bit. His time line was not mine, so that cost me money. He took outside jobs to make some extra bucks so mine sat. We finished but never again on that type of agreement. 

He had no Skin in the game,, He had no real incentive to finish. 

You either join a partnership together and each put in ex: 50K to fund a buy, and then you fund the rehab,, and then you split the profits, If he does work you pay him like any other contractor out of the rehab fund what he bids the job at for labor, you pay materials out of rehab funds. If you do the paperwork and keep track of bills and money you set hourly rate for that.. You make your buy on his estimated cost of rehab and materials,, add in a opps factor, carrying costs, realtor fees to sell, closing costs,  and figure out the profit from that point.. to see if the deal is really a deal.

OMG if I would have known now what I knew before,, We did make about 70K on the project but could have been much much more..