Joint Venture

[Bill C.]

Hi Everyone, just wanted to see what people think of the terms of this deal I am working on.  If you think there is a better way to structure it, please suggest.  I am partnering with a broker, who will also manage the flip.

Purchase Price inclusive of commissions and closing costs: 54K

Repair Estimate: 15K

Total Cost: 69K

The broker is putting in his commission of 5K from the purchase (large commission because he is also representing the current owner)  and I am putting in the rest, 64K.

Sales Price Target: 95K

Sales costs and commissions: 9K

Total Proceeds:  86K

Total Profit: 86-69 = 17

The broker gets his 5k commission back and I get my 64K back.

The first 10K of profit goes to me.  The next 10K of profit goes to the broker.   Then it's a 50/50 split after that.  Since there is only 17k total of profit, 10K goes to me and 7K goes to the broker.

In addition, the broker has collected his commission 3% (6% if he also finds the buyer) on the sale price of 95K.

If there is a loss, they are shared 50/50.  The broker max loss is his 5K contribution.

I am thinking of switching to a hard money loan.  I am not comfortable that he gets two turns on the commissions.