My first flip, need some advice!

[Mohammad Zahid]

So I've been highly interest in investing in real estate for quite sometime now. I've watched numerous podcasts, read many books, I even passed my real estate exam to become an agent. After looking around for deals I came across an opportunity, I just don't know if it's a good idea and how to go about it. The deal: I found a owner vacant house. The owner of the house offered me to fix up the property using my cash, and then flip the property and from the profit give him a small share. So basically instead of buying the house from him and then flipping it, I fix it up and then pay him for the property. The asking price is $375,000 , rehab cost is $70000, ARV= 550,000 Once it's flipped I would then pay him $375k and an extra 10k and I would keep the rest. It makes more sense to buy it myself and flip it but I don't have that kind of cash reserves or the ability to get a loan yet. So it sounds like a creative way to flip. My question is how can I make sure that he doesn't change his mind once I'm done fixing it. Is there a way we can notarize a document in which he is obliged to give me the remaining profit. Or for him to transfer the deed to me without any money but have in writing that he will get "x" amount when the property is flipped? Also, I'm looking for good contractors/ mentors/ private money lenders in Long Island, New York. I really want to take this real estate investing extremely seriously. I would appreciate any feedback and would love to find a mentor that could help me with my journey in the real estate investing world.

[James C.]

Hamad,

In general it's not advisable to sink money into a property for which you do not have ownership interest. One way to do this deal is to have an agreement drawn up in which specifies who does what and who gets what monies. Best to spend a few hundred or even a grand, and have an attorney do that work. 

A suggested structure might be a couple of LLC's with a partnership agreement between them. Another option, is 3 LLC's two (yours and the seller's) are partners in the third one. Ideally, you should get added to the title and insurance, since your money is going to the rehab, and you need to be secured in the event of a loss. Again, I'd spring for an attorney to advise you on the best structure, but those are a couple to run by them.

Sorry, I can't help you on the contractor/mentor etc. I am 100% sure someone else here could.

Good luck!

Jim