All Forum Posts by: Jerry Sexton

@Chad Miller

My statement was a genuine question, not to come down on your thought process.  I was simply asking for clarity as to what would be different from the deal you describe as opposed to me just hiring you to do the work on my flip.  If you are the responsible for sourcing, negotiating, and getting the deal under contract, that is a different scenario.  Someone who does all of that, and then brings renovation expertise with their own team to a financial partner is a different situation than how I initially read your scenario.

 @Jerry Sexton,

If you bring the deal, the analysis, the plan, the labor, etc. and show private lenders the numbers so they see how they profit from investing with you and how their investment is protected, why would they not do the deal with you?

An investor perspective... you have to define your value-add over me just finding another contractor and pocketing 100% of the profit. Could be one of:

1) you are eating the upfront labor cost.... I have actually seen this model between an investor and a contractor I know. In this model you are expecting to get more than your standard labor rate via 50% of the profits from the flip as a return.

2) You are not eating the upfront labor costs during rehab, but.....you have some way of finding seriously great property bargains and are bringing a flipping investor into a highly profitable deal that they could not easily find on their own. You could even work with a buy-and-hold investor by pre-agreeing to an after-rehab price, have the investor cash you out at that price when finished. This could be huge right now because good deals are getting very hard to find.

3) you guarantee the investor a specific return on their money... basically hard money.

Who's finding the deals in your arrangement? That's a key detail. If you are finding them (and they are good), you have a lot more value to bring to the table. 

I'd be interested in hearing what people think about CPAs but your lawyer should definitely be located in the state you primarily operate in IMO. 

if the deal was structured the way you state above I would want a guaranteed % of return on my money instead of a chanced 50/50 split. Especially if I don't know the person. Just my thoughts. 

I too am wondering about this.  Because if Jerry Sexton didn't have his own remodeling business, he would instead be managing a contractor who does and/or putting some of his own sweat equity into the place.  I would think he's bringing some added advantages to the table with his remodeling company, with costs, and having total control over the process.  But seems maybe it would make more sense to also split the profit on the remodel, or simply discount that profit to maybe half of what he usually charges, so it's perhaps less of a conflict of interest in a sense.  I am wondering some of these same questions - as our next flip, we will be using private friend money, and I'm wondering what might the split be for us doing all the labor in the rehab ourselves, vs. hiring somebody to do it, which would then be a cost that comes off the top.

Why the aversion to hard money?

As I'm reading these responses, here's what I'm "hearing"...

Folks want to see a guy go out and find a property to rehab, borrow your money to do the deal (i.e., you're "the bank"), he does all the work including finding the property and selling the finished rehab, he gets paid like an employee and you get all the profit with no effort into the deal ("skin in the game").

...or, did I miss something?

@Chad Miller, what @Jerry Sexton brings to the table is the property, the labor and the management.

David J Dachtera

What Chad Miller said was my thought. If I am bringing 100% of the financing, what can you offer that deserves a split in profits? If you charge as normal, it would appear to be a better deal for me to just hire another contractor that charges the same amount, and I keep 100%.

Depending on the actual numbers, maybe you supply materials, at cost (if you can get better pricing), and pay the labor out of pocket. Then your hope is that your cut is enough to recoup your out of pocket expenses, just like the person financing hopes the sale recoups his out of pocket.