Flip financial advice/question

[Steve Sauro]

I have several rentals but have never tried a flip.  I'd love to hear from anyone that has FINANCED the purchase and then had a contractor to the the work - then sell it and split the profits.  I just want to make sure all of my math and finances are accounted for so I can start to look for potential properties.  My thought was:
1 - I put the down payment and assume the mortgage.

2 - Contractor (no skin in the game at this point) buys materials to complete the necessary upgrades

3 - When it is done we sell the property and subtract the down payment, material cost, mortgage payments, utilities, settlement costs - and then whatever is left we split.  

Am I missing anything?  Am I oversimplifying this?

Thanks!!

[Oscar Rodriguez]

Originally posted by @Andy Thompson:

@Steve Sauro there was another post recently asking how to handle a similar deal, except the contractor wasn't family. The contractor ended up bringing receipts at the end of the project that were $40k in excess of the $80k they had budgeted for rehab (so he said rehab cost $120k). They'd had an agreement, don't know if it was written down, which required a PO prior to overages but they didn't get the PO's...so now they're in a sticky situation. All this to say that with fluctuating material costs and lead times it's reasonable to set the expectation early on that he should be reporting costs and submitting change orders--and also what will happen if it isn't handled correctly. Tell your brother that any investor will expect some amount of reporting during the rehab, and you're helping him learn to do the additional administration required to be a partner in a deal. That will hopefully remove the strain from your personal relationship and help keep an air of professionalism to the project.

 In this situation what I did as a contractor is make a google sheet with every transaction that I made including material and labor and I would fill in my daily spending at the end of every day ..... to further note every Sunday my partner and I would go over this google sheet so we were always on the same page. What also helps is making a pro account at these material stores so that they keep a record of receipts and what was bought.