How would you split a flip?

[Scott Brewster]

I am teaming up with a realtor friend and a contractor friend. I will be acting as the private lender for the entire purchase/remodel, the realtor will be our deal finder/seller and be paid commission, and our contractor will run and manage the entire flip.

Is a 50/50 split for lender/contractor ok here? We flirted with the idea of charging interest for the purchase as well as paying contractor per week for labor but I think we'd both be better if we just pay each other out after all expenses and split the sale profit 50/50. Anyone else have a similar situation like this? Anyone else have a more creative way to split these up?

I appreciate any insight!

[Will Barnard]

Originally posted by @Scott Wolf:

Originally posted by @Steven Skinner:

@Scott Brewster - I'm a little confused on who's taking ownership of the property, as well as the terms you're using to describe those involved. You mentioned teaming up with two others, totaling three people, but then asked about a 50/50 split between the lender and the contractor. Also, where the terminology comes in, if you're serving as a private lender that would typically imply that your name is not on the deed, rather in lieu of that your interests would be protected via a mortgage or Deed of Trust, depending on your state. So firstly, who is going to take ownership of the property?

This is spot on, and exactly what I would have asked.

It sounds like you'll be buying the property all cash, and the contractor doing the renovations. If that's the case, you're bearing the brunt of the risk, with a lot of the reward to the contractor.  Will they have any skin in the game, or will the be paid for their work like any other normal job they would take on?

Agreed. I will happily take 50% of your profits for being the contractor/project manager. Where do I sign?