Is it possible or advisable to joint venture flip with a seller?

[Mark Mathews]

Does anyone have experience or advice about offering to do a flip as a joint venture with a seller of a SFR?

I'm proposing that if the seller is willing, we get an appraisal for the market value of the property as is, and then let the owner continue to make mortgage payments while I renovate. Then when we sell, get back my renovation cost and split the profit with the seller.

This would cut down on my cost of money and turn a reluctant seller into an enthusiastic JV partner.

Good idea? Bad idea? Helpful suggestions?

Thanks in advance.

[Brian Pulaski]

I imagine with the right buyer and a solid contract/expectations it is possible.

My biggest issue would be the appraisal. I bought a flip that had just received an appraisal. He valued the house at $160,000. I bought it for much less and had to put close to $75k into the renovations. It sold for $250k giving seller concessions. In your scenario, after closing costs, my deal would have netted nearly nothing. Appraisers seem to give an estimate of current value at retail prices (if it's a $200k house and needs $20k in work, it's worth $180k). Investors buy houses for much less then its retail value minus the cost of the work, it's where the profit comes in.

Just an angle to keep in mind, as your deal may never get off the ground from the start, and whoever paid for the appraisal would be out that money.