Partnerships With Contractor
My husband and I have done two rehabs so far and are finding it a lot faster contracting out more work. We were approached by a contractor to team up on a more permanent basis.
We would finance the properties and the contractor would handle the rehab. Then we would share the profit. What are common arrangements for this kind of partnership? Thanks. Tracy
I agree that you can turn it faster if you contract out some of the work, but I don't see why you would partner with the contractor. Why not just pay for what they do?
Yea, "partner" is not quite right either. Don't actually need anything legally binding.
I've found the search for contractors sometimes a little annoying -- a few are know-best and just out for themselves. OK for them. I'd like a teamwork kind of thing. A percent of the profit could be insentive to get it done fast. I could spend more time finding and financing while he makes it go right to get done on time.
I was checking to see if anyone is doing this and what their arrangements are.
Thanks, Tracy
Sounds like you know what you are doing.
I'd suggest getting whatever agreements you make in writing.
Curious if others are working this way?
well,
my mentor and i have found a vacant lot that is in an upscale growing neighborhood and we're thinking about buying it. I asked the question,"why do we want vacant lots?" his reply was,"because, if we have have a vacant lot thats in a growing neighborhood, we can get a builder to build a house and split the profits once it sold." my reaction was:
so yes, i believe its related to the topic but thought i'd throw that one out for you guys too. good luck and happing investing.
[addsig]
When you are in the position of having more homes to rehab then you can handle yourself it makes perfect sense to do a team up deal like you are speaking of.
Traditionally it seems like usually you do a 50/50 split of the profits. You put up all the money for the purchase and the materials, he puts in all the labor.
Drawing up a simple joint venture agreement will keep everybody friends and honest.
Tracy,
I wasn't concerned about legally binding, although you should be sure that everyone's interest is protected through proper agreements.
My reaction was that you might look to pay the contractor for his work and keep profits for yourself and avoid the entanglements of partnerships.
If you can't afford to pay for the rehab, there is money available for covering acquisition and rehab up to about 60 or 65 % of after rehab appraisal. This is expensive money but you should only need it once or twice and you will be able to take your profits and pay for the whole project in the future.
Just my thoughts,
Ed
Thanks for all the responses. All good data.
Tracy
If you go ahead with this get a joint venture agreement. partnerships are liable severally and jointly.
There have been many cases where "partners" were held liable for the egregious conduct of others.
I would never enter into a partnership without one of these agreements.[ Edited by Stockpro99 on Date 12/02/2003 ]