First this is not so much a question of legality as it is what should I expect to make or what shold I expect to give?
I am primarliy a contractor and have been doing rehabs with my other work for the last year. I am running into investors who consistently get bad rehab contractors. Guys who just don't have the right skill set to do a proper rehab. My financial situation is not right to fund my own rehab yet but I am working on it.
Here is my question I am learning the wholesale side of this and want to partner with an investor to perform the rehab. What should I ask for in return for providing a turn key deal, locate the property, work ALL the numbers, estimate construction cost, and perform the work. What would be fair? I don't want to be unrealistic but would like to make a fair profit for my work. Any advice on how to approach this would be greatly appreciated. What has worked for you or what would this be worth in your mind?
wouldn’t happen to be in Dallas, would you?
I would consider it like this:
you get paid for all purchases/materials in the job
you get paid for your time (agreed upon in advance)
the investor gets the first $10,000 of profit ($20k, whatever)
you split all profit above $10k 50/50 or 60/40 or whatever you agree to.
the biggest problem is what to do when costs go over budget, you go over time, or you end up holding the property longer than planned (holding costs over budget). who pays? what’s the reimbursement plan? what’s the exit strategy and plan B,C & D?
and do EVERYTHING in writing.
I like the idea that gauruntees my investor the first $10K. I would also be happy to take 40% of the after close profit.
As far as running over time on the project I feel it is my responsibility to meet realistic deadlines. Any overrun on time would be my responsibility as the contractor.
Overuns on materials for unexpected material purchases would be added to rehab budget. However, if the place is looked at properly the estimate should be right on the money. The only scenario I see as a problem is on a property in really poor condition. In this case you have to assume there will be these kind of costs and be prepared for "if we run into" situations. These properties usually bear the cost though because the intial investment is smaller and profit potential bigger.
Thank you for your input, any other suggestions would be appreciated.
By the way I am in Pittsburgh, Pa but would travel in order to work with the right person.