Investment proposal from friend

[Gabe Rangel]

My buddy just obtained his broker's license. He has flipped a couple of properties. He asked if I wanted to invest. I asked what was required. He said it depends on how much work I put in & how much capital I raise. He also gave me the option A to go half with the deposit & any other rehab materials, show up at work sites, & we would split half the profits. Option B was to take out a conventional loan in my name, & he would fully fund it. I would come to work sites on the weekends, take notes & collect 10k once the property was rehabbed & sold. Are these good options to gain experience? I have never flipped a property & wanted to start building my own portfolio. Thanks for reading.

[Evan Polaski]

@Gabe Rangel, I am first curious why you would need to sign the loan?  There is no issue per se in this, but just curious.  And when you say "show up at work sites" do you mean to check progress and stay on top of contractors, or do you mean you are the contractor being put to work?

My (and several other flippers I know) arrangement with investors has been: the cash side of it is worth half of profits, and the project management is worth half.  Loans fall under the "management" side for my arrangement, so I do not collect a bigger cut by securing and guaranteeing loan.  

Typically, when working with investors, I often times put in half the cash and managed the project, so I would get 75% of total profits (50% for management and 25% for my half of the cash).  

At the end of the day, if you are looking to get experience in construction management, then both options can be useful.  If you have the cash, time and believe in the deal, then option A seems more lucrative.  But if you don't have cash, but can secure a loan, and still get some experience, B isn't a bad option either.  In my experience, most contractors don't work weekends, so not sure what the intent of showing up on weekends would be.