All Forum Posts by: Shelly Byce

@Joel Forsythe, we are absolutely doing that. Going to get everything hammered out with a real estate attorney. We (construction side) already have an LLC in place, and our friend will form one as well. What did you mean when you said, "I would never do this if I wasn't involved in the investment side…" Are you speaking from an investor perspective or contractor? Sorry, still learning the verbiage 😁

@Mike 

@Mike Klarman  thank you for all that! Still working on the deets but will take that info to my hub. Appreciate the breakdown! 😊

Shawn,

Just to reiterate, our friend will be doing nothing, except putting money in the shared bank account. If it were you, would you think paying a certain percentage on the money lent (like how hard money loans are structured) would be smarter for both parties for the event where a flip goes really well and our money partner make a bunch, or, where a flip doesn’t do as well and he doesn’t make much. Perhaps more consistent for him in that instance? We definitely will restructure once we’ve got a few flips under our belt. He is really doing this for our benefit. Making some money along the way is a bonus for him. 

Hi Shawn!

Thank you for your reply! My husband would be doing everything you asked. Finding the property, negotiating, finding and managing any subs for work he would not do (such as plumbing and electric), purchasing materials, doing quite a bit of the labor. I would be just as hands on plus designing. We would manage the sale as well (with realtor friend). Our friend would be funding the purchase and the rehab costs. Trying to wrap my head around this…. Is this scenario any different than a hard money lender lending 100% (we did find one), paying as part of the rehab cost, a contractor, and only reaping the benefits of the interest and points he would charge? My husband would be that contractor that is getting paid as part of the rehab costs. Our lender friend is making money off the split in profits rather than on the interest of the loan.

Hi!

My husband and I have begun the process of getting into house flipping. We are brand new to this; however, my husband has been in residential construction his whole life, including many years in project management of residential home developments. We have a friend who would like to put up the cash to make this flipping a reality. Our question is, how do we structure the deal fairly? Because my husband is a contractor, this will be his full time job. Meaning, we have monthly bills to pay, and so he has to take a salary. At least at first. Our friend only wants to act as the bank. We already know that hard money lenders make roughly 10-12% in holding costs and all of that. If we don’t structure it in that way, but instead we split the profits at the end 50/50, is that fair for all? My husband would get a salary (a contractor still gets paid during a flip - whether it’s him or someone else). Any advice is appreciated! We do know of all the risks involved in working with friends, but this is a happening deal. We just want to make sure is fair for all! Thank you!