Profit % From Joint Venture Agreement
Hi all, The contractor I usually use on my rehabbs wants to do a joint venture agreement with us. We basically put up the cash for buying the house 1/2 of the closing costs to the eventual buyer and 1/2 of the holding costs. They will buy the materials and provide the labor for the rehab. My question is how to split the profits. If I do it according to the monetary percentage that each puts in, then they come up at about the same as if they had just charged me the labor to do the rehab in the first place. Any suggestions from people who have done this in the past?
Thanks
Joe
[addsig]
Hi, Joe and everyone. I am a newbie who has done a lot of reading here but no posting. I am in a similar situation as you, Joe. I have access to cash via HELOC (with interest only payments) and have a rehabber who is looking for an investment partner. I will provide all the cash for purchasing the property and funding the rehab and he will do ALL the work. We will split the profits 50/50. In my opinion this will be a great learning experience for me as I haven't yet made the plunge into the world of rehab and my prospective partner has a couple years experience under his belt.
My question is this: What is the best way to arrange the deal so that both of us are protected? I was thinking Joint Venture agreement, but I would like to know if there are other ways (i.e. lien on the property). Is there anything I need to watch out for when entering into a situation like this? Anything I need to make sure is in the JVA besides the obvious profit/loss split, contributions, responsibilities?
Any and all advice is greatly appreciated.
Thanks,
Mark
The way I am arranging my investor deals these days goes like this. The cash investor gets a 10% annualized ROI on his cash off the top. Above that we split 50/50. I find the deal, do or supervise all the work, find a buyer/tenant for the other half of the money.
Exactly how this fits to your situation I do not know.