Joint Venture - Need Your Inputs!

[Arthur C.]

Hey guys,

I would like any of you who have worked in joint ventures in the past to please consider sharing your experience and tips/advices regarding the joint venture I am considering in establishing for flipping/rehabbing.

The person whom I am considering working with in a joint venture does not have much cash on hand. We will be responsible of the property purchase at 50% / 50% allocation. I plan to put up mine all in cash. He will do his 50% in financing. This will ensure that he has some “skin” in the game. I will also put in all rehab costs and he will not put in any. However, he will be mainly responsible in ensuring rehab process is moving and determine what work he thinks we could do ourselves and what work we will certainly need to sub out given the fact that we both have full time jobs.

We will split the profits at 50% / 50% or 60% / 40% for me and him, respectively. The % of profit allocation will be determined based on how much contribution he has made toward the project. I will be the one to make the decision but I will be totally fair in all costs. What do you think of this?

In terms of how we should create a joint venture, I am a bit stumbled on how we should set up one. I already have my own LLC for my own personal flips. That being said, should we set up a new LLC together in a joint venture? If so, how exactly will this work with his financing for his 50% portion of the property purchase. I don't want to be any part of his 50% financing since I will have already put up my 50% in cash. Isn't that going to be an issue for the lender? Can lender just lend money directly to him under his name only for his 50% portion of the property purchase without me? Other issue we will likely encounter is lender likely won't give loans, especially when that new LLC that we will set up for a joint venture has no history of past flips and they will likely charge a higher interest rate for him. Given your experience and knowledge, how should we go around this?

I truly appreciate your time reading and your willingness to help out with this.

Arthur