Hello, I am exploring being an investor in new single-family home construction in a busy/in-demand metropolitan area. I had a home built by a local builder a few years ago and have been interested in getting into being an investor for a home builder.
While I believe a typical arrangement is a profit sharing type of arrangement, I had a few questions:
1. If I 100% fund the project (purchasing the land, securing the construction loan, etc.), would a 50/50 profit sharing scenario be common/acceptable? If so, is that assuming that the builder builds at cost (and "proves" it by providing invoices/etc. by the subs)?
2. If #1 above is correct, how does the builder handle their overhead, i.e., salaries for staff, etc.?
3. Is an alternative arrangement where the builder builds at a discounted rate, and then the investor handles selling the property + gets all profit?
Any insight or advice would be greatly appreciated. Thanks in advance.
