but, if you're going to, somewhere, somehow, make sure they have some skin in the game (like option #2)...but that's probably too high of a payout anyway.  30-35% might make more sense. 

Well unlike Account Closed  advice I don't think he saved you 25k in fees  LOLthis is quite simpleyou have the developer sell you the lots.. on  contract  .. the developer then subordinates his beneficial interest in said contracts to the Banks construction loan.. you are the owner you build and then sell.You can do a participation note with seller.. so they get a fixed number plus a little interest on the note and then a % of profit if you wish.now the only wrinkle will be if the construction lender will allow a junior loan on this and you having no real skin in the game.If the construction lender wants the lots as true equity.then you would need to for a JV agreement with developers portion the lots.. and what ever your business arrangement is.. if the developer has less than 20% interest in this newly formed LLC for these two build jobs.. then they will normally not be required to sign on the construction loans.Construction loans in today environment are very tough especially specs.My Portlandia bank will give me 12 specs and my Charleston bank will give me 6. so i can have 18 homes going at one time.  

I would imagine that the details of how builders structure partnerships vary based on the specific nature of the deal and the parties involved (how extensive is each person's track record, how much money will the investor be expected to invest, how much money are you willing and able to invest to show "skin in the game", etc.). 

Noone wants to do a deal with a noobie unless they have skin in the game, offer a return or some other concrete skill.

I get so irritated with the daisy chain deals. 

You will need to gather assumptions or facts on property management fees (10% typical average), vacancy rate, down payment or skin in the game (typically 20% for conventional bank mortgages or 25% hard money lenders), purchase costs ( could be more or less than asking price), rehab costs/expenses( estimated costs of repairs in your area on common repairs/ fix up costs to make Rental habitability, security, safety within or above state and local landlord/ tenant laws/codes).

If you use private investing to fund the 25% down payment and secure seller financing or traditional bank financing for the rest how do you compute the IRR?  It

If you we're looking at a 20 space park that would be seen as less of a "risk".2) Skin in the game.

Split everything 50/50 and put just as much skin in the game as him.  

You will need to put money into the deal, they will call it "skin in the game".