All Forum Posts by: John Crandell

I agree with you Christopher, I am a GC in WA state trying to get a start since my wife and I moved from MD. They do things a little differently here. I have the same questions as you, how do I get started, perhaps just do it? I had to take up work with another company and you are right, the state of the market is just as you say, build it fast, build it cheap.

I long to be able to give a bid on a well built house that last a family generations, but I am afraid cheap and fast would win out.

This may not be totally on topic, but just a word of caution, when you mentioned adding a bedroom in the basement by adding a couple of walls, will some of the added walls create a closet? Another requirement for the bedroom is an egress window or door to the outside from the bedroom. If these two things are not present, it cannot be claimed as a bedroom. If you do then great!, good luck on your sale.

@Troy Sheets, It is a big enough job to last about 2 months not including getting permits. It is all on me, the stuff that makes the rehab happen, subs scheduling material lists, I will be doing hands on as well, as much as practical. Some of it, like drywall will be subbed out. I can handle all tile, cabinets, trim, stuff like that, it is a small house after all, and it gives me something to get into while other subs like electrician and plumber are around. Yes the pay I will be getting is discounted, but pulling a 40 hr week, it will pay the bills, so I am cool with that. I discounted by removing the profit and overhead, for the most part, actually that and then some. I pray to recover that at sale time.

The partner is getting a commission, I am getting an education on "how things work in WA state" and picking up on any nuggets of info I can to become more self sufficient, so I can do deals with partners on a 50/50 basis with out having to pay "dues" or points in this case.

His labor will free as will mine when it comes to getting subs lined up, making any calls needed, stuff that an office would do. After that he is supplying all the funds, except the points. It seems worthwhile, on the next one since the house I referred to at the beginning  fell through a few days ago.

What I seen in the comps after I understood what the partner was looking for, which was the same idea I had ( which was good) we were going to turn a 572 sq ft 1/1 into an 800 sq ft 2/2. The comps were right on from what I seen. The comps we did at first were before the house visit and understanding what potential the house had

@Marc Dupuis, No I did not see it as that either, but it is income and potential profit, and yes, a learning experience too. Though I have been in the building trade for 43 years, supervised for half of that time, this is still a new format for me. A lot of this stuff that it takes to do this was done for me up front, I walked onto a bare lot with surveyors, and subs and built multi million dollar homes for the company I worked for 22 years in Maryland. It is oversimplifying the process, but I was the hands on guy, not the paperwork guy getting this all together so I could set foot on that property. After I am on a property, I can schedule, order materials, meet with inspectors, what have you. I got that part down.

Bellingham is really a hot market. The good deals are getting hard to find. This one guy says in this market it is sometimes necessary to take a smaller profit, and move onto the next. I don't have the luxury of being choosy at this time. I and my wife have been here for 8 months and I need to decide to take on a regular job, or devote all my time and leftover funds to get my contracting business in full swing, which I feel will take away from what I really want to do, buy, rehab and sell.

Once I get the first one down, and see how it is done, it will make a big difference.

I understand what you mean, thanks for clarifying. I had hoped the partner actually meant that the points would get paid back before profits were split. So I called him thinking this is what I would be told. He filled in more detail. Since he is providing all the funding and has done this before, he could do it all himself. The paying of points is my skin in the game so to speak. My words not his, but it meant the same. I did not wish to push it anymore. I did not want to turn this guy away from the notion of a partnership with me. The hourly pay for me has gotten necessary, the funds we had when we moved here are getting really tight. Much tighter, I will need to get a regular job, working for a company... The way I am, that will take up all my time. It's the way it usually goes, it has for the past 23 years, up 'til a year ago. The commission and hourly pay were the partner's idea, I thought it was a good one....

What it looks like to me is, it is a take or leave it situation, without going that far to say it. It looks like a great opportunity to learn, get the feet wet, so if even this particular house may fall through, there has been ground work laid out for the next one.

To answer the last question the house is a  576 sq. ft 1/1 in a fast selling community, nice area, lots of older homes, nicely done. Asking 173K the partner has a top offer of 142K. It has been on the market for 100+ days. With a complete gut, new plumbing electric and everything in between, including a master en suite addition. It will bring the sq. ft. up to around 800. Maybe windows and doors too. It will be totally rehabbed, figuring about 80K to do it. I checked the comps of the recently sold and seen other houses with 800 sq ft go for 270K, 230K, these were 2/1. The partner think it can be sold for 250K.

Thanks for the responses guys.

@Chance Housos, the split will be the same after all expenses are paid out. 

It is being done for both the money and experience. The funds we came over here with 8 months ago are dwindling down. Contracting work here and there helped stretch it. This would be the first investment property that I would be involved in, so a big yes on the experience part. I can easily see the cost of experience meaning lower profit. The thing is, and this is what Nick Britton picked up on, that the margin is not that great, and if it only has a potential of 10K for each, myself with a $3500 gross plus wages, which would be great if it went that way. Back to the point, The chance is there that is could be less, much less. The comps my wife checked are not that promising. The ones I seen are fair, the realtor investor is a life long resident of the area and has been in business for years, so I am going on his say so a bit and trusting his experience.

The 40 hr week would make the bills easier to swallow, things are getting tight.

I don't understand about the "If not why don't both of you not get paid except for profits", if you could clarify. I am letting the partner pretty much dictate everything except for my pay. 

@Account Closed, I don't see it driving me crazy. I love my trade. I love "driving the bus" as a friend of mine put it, when it comes to home renovation, the partner will let me have total control over it all, but I need his input on how funds are spent, and a governor on not over improving. 

Yes I can see this partnership happening, I am apprehensive on the balance of how the money is spent, referring to the points I pay, not resentful. The only resentment I have is on my lack of experience, which I will change in time.

The only headache I see is keeping abreast of the code for the neighborhood. Setbacks from property lines, plans, working with neighbors, noise, subs. It's the usual stuff, part of contracting...

I thought the 50/50 was the norm, it's just that points thing. I also think I am possibly over-thinking this. I am good for doing that. If the house turns a better than $6500 profit for both of us, what's the problem???

I am a general contractor in the NW, been struggling to find my first rehab because of the usual problems: funding, availability, the usual stuff for first timers as myself. When I first moved in the area I met a number of individuals in the realtor field, some of which have gotten a number of flips under their belt. These are the guys I want to learn from, and I told them so if there was anything I could do to make it worth their while to work with me on a flip. Time passes by, always being in contact will all my new acquaintances, one of the guys tells me of a house he would like to work with me on. We look at it, we both see that possibly some money can be made on it (still need to to a feasibility report on it, to see if it really is). From there a rough draft of a partnership is drawn up. Even though this house may fall through, getting a working relationship going with a realtor/investor is a far cry from where I was a week ago. 

It is written in plain english, reading it over I am concerned over just one part. It was written while we met at a local coffee house, I was watching/reading as he was writing. Most of it is easily agreeable. Before I get to the part that concerns me, here is the bulk of the partnership.

There is still debate on whether to create a new LLC or use my LLC for the purchase of the property. I think a new LLC is in order.

I will have all control and final say of the rehab, scheduling, all of it. I want his input as well. A portion of the work is the addition of a master en suite. It is a small house and really needs the extra room. It is in a VERY desirable part of town, will most likely needs a complete gut, the house is a 1926 build. My financial involvement is paying the points.

The partner is going to fund all of the purchase and rehab, list it and collect the 2.5% selling commission. He will not charge me an interest rate on the purchase and rehab monies.

We will both split the profits 50/50, should there be any. We are counting on it. We will both contact the subs and do other managerial stuff for no financial consideration. The profit will be the reimbursement. I will receive a paycheck from any hands on work I do. I am a master carpenter, well rounded in many aspects of home building, 43 years in the trade has taught me a lot. The paycheck for a 40 hr week should it go that way will take care of my family's weekly needs. The chance of actually being there 40 hrs week is slim, but possible.

My concern is the paying of points. The cash out of pocket for me will be approx $6500. The profit would need to be over that much just to break even I think... The rate I will be getting paid is 66% of what I charge for contract work. His take on the idea of me paying the points is the 50/50 split. The points entitle me to the profit share. If I was hired as a GC and I charged all my time and markups, he would not need to share anything. Perhaps a good point?

This still seems to be a little one sided, I am sticking my neck out for $6500 and my time, which I am confident I will get compensated for, but the partner will not only get a potential profit, but the commission from the sale. I don't want to sound ungrateful, but I will have a lot of sweat involved, which I will get paid for at a reduced rate, but to realize a profit for me seems a bit of a stretch. Some money can be made although the margins are tight. The partner thinks there will be 20K to split. Hopefully he is not being over ambitious in his comps.

Could some of you guys fill me in on what the normal setup on this type of partnership is, or is this unique?

Thanks in advance, I will end my novel.

Are there any meetups farther north around the Bellingham area? I am aching to go to a meetup, but the drive time would make it an all-niter for my wife and I. With a small farm and animals, it would not be possible with a 3 to 4 hour drive one way....

Thanks for the encouragement, @Ken Sheppard. That's the kid of stuff that helps keep me going...

I am in the Bellingham, WA area, and have had a number of promising houses sent my way. When I presented a house to make sound offer on to the one person I was to work with, a relative who said he wanted to go into business with me, he backed out. His concern, and rightfully so was, if the property took too long to sell, what would happen to his funds, would they be forfeit? The Bellingham market is pretty hot, houses do not stay on the listings very long. I believe his concerns were unfounded, but it is his money, his life savings, so I can't fault him.

So onto the matter at hand. The only chance to see this adventure start is to reach out to others on this website. It is not a full funding I require, I am good for the lions share. I already have preapprovals from 2 hard money lenders. A letter can be sent if it helps.

My profile has a few of my credentials I believe, if it is not enough, an improvement is needed. Contact me through whatever means you find comfortable to you, I can send a resume if needed, or chat, talk, or meet somewhere.