All Forum Posts by: Bryan Lawless

Hey Everyone,

I'm looking to invest in real estate flipping in the Atlanta area. I would work with a group of investors and I was wondering if the following deal makes sense or if there are other things I need to be wary of. We have not done house flipping before, but one of the investors owns a home renovation company.

Here’s the proposal:

We would use a real estate wholesaler to find a house to renovate (in a low days on market area). Then we would purchase (through a new LLC started by one of the investors) and renovate the house with cash – cash pooled from all the investors. At the end of the project, we would all split the profit according to how much each investor contributed - i.e., if I give 43.7% of the total cash, I would get 43.7% of the profit when the house sells. Does that sound like a decent deal?

There are three exit strategies:

 1. The house sells and we split the profit.

 2. If the house doesn't sell within 60 days of listing, then one of the investors would buy the house (get  a mortgage on it) and live in it

3. Cash-out refi, or home equity line of credit and we would rent it out through the LLC.

Is there anything to watch out for in terms of these exit strategies?

The proposed timeline is:

1st month: Purchase, plan reno, order materials

2nd month: Renovation continues

3rd month: Finish work

4th month: Put the house on the market

Does that timeline seem realistic?

We would use a contractor that’s licensed and insured, and we would have insurance for fire, theft, and liability during the project.

What else should I be concerned about? What kind of document should be drafted and signed by all of us before commencing on the project?

Thanks for your suggestions!

Thanks, Matthew! This person is very trustworthy and has a good track record renovating and selling houses for profit on his own, but using bank loans instead of an equity partner.

Can you explain what you mean by holding costs that accrue over time?

Thanks for mentioning the penalty points - would that be like interest on the total amount of money loaned or something different? 

I'm also wondering how to write our agreement to plan in case the renovation/or eventual sale is a flop and I end up losing money on the deal.

Thanks again for the response!

My wife and I have money that we are considering investing in real estate. I know a guy that needs funds to complete rehab projects. I'm very new to this field and I need information on profit splits. I am considering the following scenarios:

1. I fund the purchase of the house (as an equity partner/silent investor), and my friend funds the renovation. Let's say the house is $60,000 (from me) and the renovation is $15,000.00 (from him) - what's the typical or fairest way to split the profit when he finishes the renovation and sells the house? My friend is also a realtor and an appraiser.

2. I fund the entire deal - house purchase and renovation (as an equity partner/silent investor) and my friend handles all of the renovation work (hiring contractors, overseeing schedules, etc.).

What is a typical profit split in a situation like this? Should it be 50/50? Or something different? I just want to do the right thing and be fair for both parties. Thanks!