Homepath, Owner Occupant, Cash-Only Flip Investment through Colleague

[Steven Tawresey]

So I've referred a couple first time buyers to my realtor. Recently, she sent me a property and asked if I knew anyone interested. It is a Homepath, owner occupant first look, cash-only property in a great location in Denver. So I sent an ex-coworker over. He is looking for an investment and has cash. 

He looked at it and liked it. A lot. But the reno is over his head. A day later, he called me and asked if I want in , 50/50.

I went over there with him, we put together an estimated project cost and worked out a conservative estimated ARV. Turns out, the asking price is right in line with the 70% rule (110k asking, 65k fix up w/20% contingency = 80k , 275k ARV conservatively). Lately Denver sellers are getting over asking price but I can't imagine there's too many owner occupants with 110k cash to throw down on a place they can't actually live.

So now i'm interested. But as per the Homepath rules, he has to live there for at least a year, his name has to be on the deed, and besides, I don't want my cash tied up for that long anyway. 

So here are the basics of the deal we discussed.

• 50/50 initial investment and fix up costs
• 50/50 profits ( ARV - Initial - Fix Up - Misc.)
• Buy Out (Coworker only) - 30 days notice, based on projected ARV and % project completion.
• Pay Back (Me) - Personal equity in full after refinance or sale, Initial + Fix up due 6 months after close, will float profit for 16 months.
• I would take 1st Lien position

So my questions:

• Is this legal? To be investing in a Homepath property through another person?
• How long does he have to wait before he can refinance with a post flip ARV?
• Are there any other provisions we should add to the contract?
• Would you do a deal like this?

Thanks for the input

~Steve