Flipping With No Equity, Looking for Advice

[Tim Coakley]

Hi Everyone,

I am evaluating a new type of flip opportunity and I was curious if any of you have similar experience. I am looking at a partnership with a seller who owns a duplex outright in a very affluent area of South Carolina. The owner wants to transition the duplex into a single family home and then sell, but he doesn't want to finance or manage a renovation himself. The plan is for me to handle the renovation project and cost, and then take a proportionate share of the net profit after sale. After initial analysis the margins look very strong. My main concern is protecting myself, as I have no equity in the property and legally don't know what safety nets are available to make sure I get properly paid out on the back end. Has anyone done a deal like this in the past or have some guidance on how to prepare before commuting? 

I appreciate any insight you can give me!

[Will Fraser]

Hi @Tim Coakley, this is an interesting proposition. It seems like you'd need to be able to file a lien on the property to have any sort of recourse or protection. If the seller has a loan on the property then messing with the ownership structure will be unwieldy, and if he doesn't you could propose that you form an LLC or some such, deed the property to the LLC, then the entity doc will determine how proceeds are split.

Occam's Razor will be a good guide here.  The simplest thing is likely going to be to find a way to earn through the renovation management.