Need Advise on what is fair for splitting profit with builder.

General Real Estate Investing
1

Hello all,
I need some advice on this real estate deal I am putting together. I have found a lot and want to build a spec house to sell. My dad is a builder so I would like to have him build the house. We are arguing on what is fare for profit split. My boyfriend and I are buying the lot at a great discounted price than lot value. The Land is valued at 432K and we are able to buy it for 275K. I found the property and worked the deal with the seller of the property. I am planning on building a house for around 450K that I have to get a construction loan for. My dad would like to 50% of the profit. Does this sound fare?

2

Is your dad funding the construction cost and waiting to get paid on the back end after the homes sells?? If he is willing to go this route then splitting the profits 50/50 is fair. See if you can skip the construction loan.

3

Are you putting the land in free and clear at market value or at your actual cost?,

Makes BIG difference in who gets what as fair share at end.

4

YES!

If you can’t find a better offer from anyone else, but the deal will still make you a lot of money it’s always fair. Have you ever heard the saying 50% of something is better than 100% of nothing? If you don’t think it’s fair, don’t build the house. Don’t build something unless there’s a strong case that you will make good money on the deal. Try to stay away from vague and emotional words like “fair” and instead focus on thinking about your deals logically–“How much money will it make you?”

5

It’s sounds good that you are looking to invest on real estate market. Nowadays, real estate investment is the best thing to require.
This includes a chain of earning money…

6

If you are paying for the land AND applying for a construction loan, then it sounds you are providing the all the funds and found the investment. Note that you most likely can’t get a construction loan without having the land free and clear.

It would be important to know what your father is contributing financially to the partnership. If you are qualifying for a construction loan, and you could reasonably hire any builder with your own means, then you can treat dad as a regular contractor and pay him the contractor fees.

Good luck,

George Krajacic