Relationship with out of state contractor/PM

[Dori Arazi]

I'm from California looking to invest out of state and have found a potential partner in Texas.

This person is well connected with off market wholesalers, is a licensed contractor and is now getting certifications as a PM.

He is pretty new to this industry (a couple of years) and has already rehab'ed 21 deals with external investors. He was referred by a friend, and after meeting a few times he seems to have his heart in the right place and his remodels look good. His remodel estimates currently fall within +-5-7% of actual cost.

Our model is going to pretty much be a take on BRRRR:

- He finds a property we both agree on - I pay him a finders fee

- He renos the property - I pay him 25% contractor fees

- (I refinance)

- He then manages the property for me for an additional 9%

Final payments are not made until the property is rehab'ed and rented to make sure interests are aligned.

1. I know bird dog deals that are executed on usually go for $1000. Should I pay his a different finders fee in this model?

2. Are there any pitfalls I should be looking for here?

Any info would be greatly appreciated.

Thanks!