Opinion on 5 questions about an apparent "great" fixer upper deal

[Sachin Kholamkar]

Hi,

If I do this, it would be my first RE deal and the ARV is $1Mn!! Wanted to start small but this one came right to me. And I need some serious, blunt and honest opinions....:)

One of my associates is in a financial bind and wants to sell his "fixer upper" home in an elite community and move into a condo. Assuming he agrees to sell for $700k with expected repairs of $150k leaves me with about 50k ($150k minus 10% selling costs).

We may be able to come to an agreement where he becomes my partner in the deal. He brings his home to the deal and I pay for repairs and after we fix and sell, we share profits. Other thought is we tear down existing house and build a new one.

Questions:

If Fix and Flip:

1. I see that hard money lenders need the lien and its difficult to get a loan for repairs if you do not own the home. Plus they do not finance owner occupied properties. What other creative ways of financing can I use to cover repair costs?

2.  What kind of profit sharing will be fair to both of us? (I am thinking 25% for him and 75% for me)

If Tear Down and Newly Built:

3. If we tear down the place and built a new home expensing about 400k, I approximate the value of new home to be around $1.4. (300k net!). There is no way to confirm this as all houses in the subdivision are from 60s. If I built a similar house which is 50+ years newer, how much raise in premium should I expect on the house market value?

4. I spoke to Houston office of United Built Homes. Anyone has experience working with them? They do provide a great offer where I do not have to spend anything until first 6 months, then an interest of 7% for next 6 months and finally 9.5% for remaining 29 years. Average built time is between 3-5 months. 

5. Does anyone have recommendations on any other good builders with a similar low or no down payment offer in the Houston area and around?

I know these are lot of questions and I would really appreciate inputs from BP members. I am both thrilled and scared at the same time to do this.

Kholamkar