Suggestions for deal/partnership with contractor

[Bruce Clark]

I picked up a house at a tax sale for $1,500. It is a small 2 bed/1.5 bath. The owner before me was renovating but then just walked away from it. The house has a new roof, new windows, and new drywall in the living room. The rest of the house is completely gutted to the studs, but the bones are good. The estimated after repair value of the house is about $65,000.

I have a few rental units but I have never undertaken this type of deal. My rough estimate to finish the house is between $30,000 and $40,000, but given my inexperience, I am not sure how close I am.

I have a good friend who is a general contractor and also has an accounting degree. I have no concerns about his ability to accurately bid this job or his ability to complete the job timely. I met him at the house today. we did a full walk through of the house and we went over some ideas for a floor plan. He said he would get me a rough estimate in a couple days.

Then a few hours later, presumably after he started realizing the value/profit that was hidden in this house, he text me and asked if I would be interested in selling it to his company. Rather than selling it to him outright, I would rather do the deal with him. First, I think I would stand to make more money, but more importantly, I would like to be a part of the project for the experience.

My idea is to propose that I will finance the cost of all material, he provides all labor, and then we split the sale price. Again, I do not have much experience with full rehabs, so I do not know if this is reasonable for him or for me.

Any suggestions on how I could put this deal together in a way that would make sense?

[Bruce Clark]

@Yia Her In Ohio (at least in the counties in my area), properties with delinquent taxes are auctioned by the county treasurer. The sale is published in the newspaper and various other places a few months before the sale. This gives property owners notice that their property is going to be sold. They have up to the day of the sale to pay the deliquent tax. If the tax is not paid as of the day of the sale, and someone successfully bids on the property, they lose their interest in the property. 

If you win the property, the property is transferred to you via deed signed by the Sheriff. It usually takes a few months to actually get the deed, but that is generally just the result of the time it takes the sheriff/county attorney's to prepare and file all of the deeds from a given sale. The big piece of information to be aware of is that any property you buy is subject to any and all liens, mortgages, etc. that are on the property, so you have to do a title search before bidding.