Finding a JV partner for a 60/40 profit split?

Question

Hello BP!

I am curious to know if anyone has successfully gone into a Joint Venture deal with no money. I have time, project management experience, contractors, an architect, closing attorney, a realtor, a broker, construction skills, my labor, tools, etc...everything needed to do a successful flip. I even have a group of experienced investors to give me feedback, my local Reia. I'm a member.

Furthermore, I can dedicate full time to this and be on the job working and directly supervising all the crews. Please give me your feedback and advice.

Thanks!

Eric Army · Answer

Hi Philip- it sounds like you've got a good skill set & time to use it. Any investor should be happy to team up with someone like yourself.

I recently got involved in a deal where I'm trading my professional skills (architecture) for equity. The trick was putting a value on what I was providing. We ended up going with the value of my design fee as my "cash" stake.

If I was offering a full range of service like you describe, I could see a percentage split-- but If I were the cash partner I'd want to make sure I wasn't offering you more than I could hire a projects manager for. If you haven't already, I'd try to put a dollar value to your time/services.

Honestly sometimes you're better working for a fee (which you could invest on your own) than trading effort for half the equity/profit.

Aaron Montague · Answer

@Philip Bashaw

Put your deal up here on BP and see what people say.

Contracts are what you can get from them.  If you are putting up X, Y and Z you need to be compensated for it.  On the same token, investors don't want to throw their money into a pit of a house that you might not be able to finish.

From an investor point of view there is a BIG difference between:

I'm looking for 100% financing and we will be flipping a giant mess of a 3/2 in Smithtown, USA.

vs

I'm looking for a money partner on a flip in Smithtown.  I'll be putting up 5k, looking for the rest.

Now obviously there are lots of other details but the critical one is the simple fact that you can get the project done on time and get the investors' money out.  Preferably with a nice profit.

Bring your deal to local Atlanta investors.  It is much easier to convince someone to lend you lots of money if you can walk the property with them, show your grand plan and intelligently explain why $X dollars will bring 20% profit in 6 months.  I recommend hitting up your lawyer first.

Larry Smet · Answer

Hi @Philip Bashaw

I've done 8 deals like that so it's definitely possible.  Experience will be necessary though, so if you have that (and a good deal!) then it'll probably work.  My first flip I did with my own money but since then I've used funding partners and/or private lenders.  So 100% partner or private lender financing  can definitely happen - particularly if you have a relationship where you can leverage someone already "knowing you".  For instance, someone you've worked with before or a family member.  Once you do a good job they will typically keep coming back for more.

Good luck and let us know how it goes.

Damir Kamber · Answer

@Philip Bashaw you have a lot more skills going for you than a lot of investors. How long are you looking to invest your time vs your money. Are you alright with having that full time job and if so, for how long? Always have the end goal in mind.

Seems like finding that great deal at the end will be the deal breaker. Always keep in mind your leverage and do not over leverage.

Make sure you also give yourself a large enough spread between purchase price and all-in investment for "just in case" situations. Deals can go bad in a very quiet fashion and then blow up all over the place.

@Jeff Caravalho I think what @Aaron Montague meant by "hitting up your lawyers" is their personal buyers list. Attorneys who specifically work with REIs can put you in contact with the investors they close for on a daily basis. This could be a huge "in" with the right investors. Always make sure they are giving you money in a responsible fashion, there are still many bad loans out there and this bubble will burst once again much sooner than we expect.

Cheers,

Damir

Ivan Oberon · Answer

@Philip

It is all about how you present yourself, the deal and your "team."

It can be challenging sometimes to get 100% financing from a capital partner who is also in the "business" as they will want to negotiate more favorable terms for themselves.  You typically want to be dealing with busy professionals looking for alternatives outside of the stock market.  These are the money partners who are most apt to agree to your terms of 100% financing if you present all of the other benefits they will receive and what safety instruments and equity you are offering with the deal.

I have been party to hundreds of deals and have never used my own money and it is still very much a win/win.  I used to offer 50/50 profit splits and now my business model calls for offering a straight return to the capital partner.

You have lots of proof on here, myself included, that structuring these deals is very possible.

Philip Bashaw · Answer

Hey Everybody,

Thanks again for your advice, input and encouragement! I'm making progress on finding a JV partner and finding a good deals as well...that is definitely key to any successful flip.

Philip Bashaw · Answer

Eric,

Thanks for your input. For now, I plan on using my skill set for a few flips. That will make me a better project manager once I'm managing multiple projects at once. I like being hands on and don't need to be paid during the rehab process, just after it sells.

As far as a dollar amount, my skills, labor, management + finding the deal are roughly 25% of the project (or 10k with a 40k gross profit margin)

Phil

Philip Bashaw · Answer

Hey Everybody!

Thanks for the fantastic input so far! I was actually meeting with a potential JV investor this afternoon from Toronto. It went pretty well.

We are going to crunch some numbers and make an offer on a house that needs a total gut rehab with a 120k ARV+/- I'm getting comps from a broker tonight and firm numbers from a contractor tomorrow. Its a go with if we are at 80k+/- for the purchase & rehab.

I will try to respond to each of you individually later today or tomorrow.

Phil

Jeff Caravalho · Answer

Aaron,

Can you elaborate on hitting up your lawyer?  Is this for review of the JV contract? Thx.

Finding a JV partner for a 60/40 profit split?

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