Working with Wholesalers who are also Rehabbers?

[Angelique F.]

Hi, I'm really new and still trying to understand as much as I can before I make any moves and I'm exploring a lot of different types of real estate investments. So my latest scenario involves a wholesaler/rehabber whose deal goes a little something like this.

He finds the deal, I purchase the house and I pay for the rehab, then we split the profits 50/50? This does not sound right to me since I'm the one funding the entire project.

Is this the normal structure of a wholesale deal of this type?

[Patrick T.]

If he is actually doing it at cost, great. GC fees can be a lot. But it has to be verifiable. Look at it from another angle. The partnership structure and knowing how to manage it throughout the project is a huge part of the deal. If your were a wealthy doctor whose money was making 1.5% and you could hook up with someone who could find the property, put the whole deal together and manage the partnership, get the rehab itself done at a big discount, and get it sold to where you make a very pretty profit...that's a pretty attractive offer.

But again, this person really has to know what they are doing. They have to show you previous projects and partners. And you have to have other Pro's eyeballing the deal until you understand all the intricacies.

I would look at a deal like that with great reservation. And if you don't feel comfortable at this point in your career or with this person, then absolutely walk away. But it is a way to do business that works, keep it in mind as you grow in this business.