All Forum Posts by: Brandon Giarusso

@Brandon Battle We all made good money because we bought the place right. But it could have been more. I don't want to downplay the role of the father in law. He did much more than a typical GC. He def swung a hammer, and he's expertise and knowledge was extremely valuable. But I think $8k a month is steep and it seems like everyone else on here agrees. Even if he were worth $8k, asking for back pay after the fact wasn't the right way to go about it. That sets his payment at $8k without discussing it with me beforehand. Of course all this needs to be agreed upon beforehand, that much everyone can agree. Its been nice to hear unbiased opinions from people on here. I plan to move forward without him, and I know thats his plan as well. I just don't want to burn a bridge because ruling out working with him in the future wouldn't be beneficial for my business.

@Bill Hinshaw As @Ashley Schroeder stated, her profit is also reflected in her husbands profits. So its hard to gage what her value is. She wanted to do the design. There was no way she would let anyone else do it. As many designers can probably relate to. She gained a ton of experience from this and a ton of acknowledgement from a lot of people getting to see her work. That being said she did log some hours, no way I think retail pricing is fair because I logged many hours helping with her things as well.

Its just hard because having a partner already splits the pie, adding designer fees and now the extra money paid to his company for his father in law, it just seems like Im getting the raw end here. All that extra money goes to him even if the check is written to his wifes company and his company. So while it might not seem to him like he's being greedy, he may not see it because of that bias. 

@Bill Hinshaw Thats interesting. We decided as a group to stage the house ourselves to save money. She purchased all of the staging furniture but we are paying for it as a company. We all also put in a lot of labor helping with the staging, it wasn't just her. So that must be taken into consideration if she wants to charge staging fees. 

Thank you Bill, it is good to hear that from a similar perspective. Seems like she should be compensated, just coming up with the dollar amount is going to be the hard part. Thanks for your input.

She did a bit more than just pick out colors and tile. Her and her father (the GC) basically came up with the design, which was a complete gut, removing walls and a complete new layout. She also staged it, which was a group decision that she wanted to do, in order to save staging fees. We plan to sell most of the furniture bought for it. It was a large project. Purchases for $565K, roughly $350K put into it, sold for $1.165m.  We spilt the purchase of the house. My line of credit covered most of the reno, I put in the additionally money to fund the rehab. 

The GC did go above and beyond the normal GC duties on the project, and he was absolutely vital to the project. But there were ways he bogged it down. We were initially paying him $4k a month with the plan of giving a bonus at the end to compensate the extra work he did. The problem was he was earning a $4k a month salary already from my partners other company. And since he dedicated almost all his time to our project my partner asked to be reimbursed that money. That is the problem I have. Because we talked about this early on in the project and i told him to take him off his payroll or else lets figure out a fair compensation to pay his company back for that. But back paying the whole thing seems fair after the project is completed. Because I never would have agreed upon an $8k a month pay for a GC. Bottom line is to get all of this figured out prior to the project. Im learning that the hard way. My partner is a good friend of mine and good person so I thought it would go more smoothly. I just think he is too biased because all this extra money goes to him,even if it comes out of joint profits.

 We paid a GC separate from him, and it turned out to be his wife's father, and we paid him $8k a month which I feel was way too high, but thats not relevant here. I agree from where you are coming from, which is why I put the extra money up and offered the line of credit. However I don't feel the project went smoothly, we went WAY over budget and his subs didn't prove to me to be worth that. The deal is done, we made a profit, smartest thing seems to be to pay his wife something and decide before hand in the future. The problem now is deciding what that number is. I offered $6500 which is way higher than I comfortable with or think is deserved, and he didn't think that was enough. His bias makes it difficult, of course he wants it higher because he wants his wife to feel worth it, and it all goes to him anyway. 

Thanks for all the responses everyone, much appreciated. As stated the agreement will be agreed upon ahead of time moving forward. He does bring some skills to the table because he has a company in the construction business. So his expertise was needed for me to gain experience, which is why initially I offered to put in more money and use the line of credit. However, the people we used of his, (GC, structural engineers, and all the subs) were paid and not done at any discount, so its not like I couldn't have found these people on my own. I have found all the deals we have done so far. As far as her design, she did pick out colors and tile and all that, but we all chipped in. I had a say in the major decisions, but she did get a designer discount on a few things, which is worth something. And no, without her I would not hire a designer, I feel confident in my own skills enough to do this. That is another issue I have. I feel it is a fee I normally wouldn't pay. For are next project , we borrowed money from a family member of mine and he is not asking for any interest return on that. Which is incredible, and I am grateful, but in that case if who I have told him she cannot ask for a design fee for his wife if who Im bringing is willing to do that for us. I feel that is more than fair. He hasn't agreed to that yet, because he wants to back his wife and I get that. But if we pay her fee then I will be obligated to pay the interest fee. It wouldn't be right other wise. 

Thats a good point, if my wife had a flooring company I would expect her to get paid, but I would expect an extreme discount, because she also has a vested interest in the profit of the house. They do flips on their own as a husband and wife team, and obviously she doesnt charge her husbands company then, I guess it changes when a third party gets involved. It is just a slippery slope because I am not asking for any compensation for the extra money or line of credit I am using. It is all of my assets that line of credit is collateralized against. So if disaster struck I have all the risk. I will take that $50k back but with no interest on top.

Yes the split is 50/50. We are hiring out almost all of the work. We chip in where we can, I probably spend more time at the projects but i would say the sweat equity is a pretty even 50/50 split. 

My partner and I just closed on our first flip together and when it came down to dividing up the profit we've run into some issues. He wants his wife to get paid a separate design fee for her involvement. This had been brought up when we bought the deal but nothing was agreed upon, which is our fault. I am really trying to see this fairly and thats why I would love some outside unbiased opinions. She is a designer, but not an established one, more of a hobby. She's done a few rehabs and jobs here and there, but she is very good. I agreed to give her full design power over the project, we made some decisions as a group but for the most part she just had the go ahead to make the final decisions on anything design related. In that way she isn't like a normal designer we would hire, in that she doesn't present options and pricing and give us the final say on what we choose, she just gets to go ahead and designs how she best sees fit. I always wanted to avoid trying to put a monetary value on what each person brought to the table in the partnership because that can get ugly. I did put in $50K more money and we used my $250K line of credit I already had from the bank to fund the rehab (which I already paid closing costs on). She did put in a lot of work on the project and I guess I am not opposed to paying for that, just how much that is has been bothering me, because any amount he comes up with is fine because essentially whatever fee we pay her goes to him anyway. I Would love an outside opinion on this because I really want to do whats fair and make the partnership go smoothly from here on out because we have more projects already underway.