Have an investment property that needs some work. Mostly costmetics and repairs. Water & Electric does work. However, I took a contractor to the house and he said he could work for me and I pay him $750 weekly plus materials. I mentioned that I would think about him repairing the property and I pay for material. I told him he could get a check when the property is sold. Numbers. 23,000 loan on property. ARV = $80,000. A smaller property 5 doors down is being sold for $70,000. The comps are in the $70,000 range. This contractor has done work in my home. He gave me new bathrooms and a beautiful patio. His work can be in a magazine. Very impressive. Anyway, I was thinking $10,000 after he makes the house sellable in 1 month. I know how quickly he works. I don’t know maybe $200 weekly so he can get buy while he completes the work! Oh, yea he called me yesterday and told me he taught about what I mentioned and he is interested in working something out. How would any of you put together this deal with little out of pocket funds until the sell? Your response is truly appreciated!
I did a deal with a contractor who did all the work and bought materials and we split the profit 50-50. It worked out well, but he had other income and was okay to wait until it sold.
I think your idea about paying him something minimal and then a percentage of the profit instead of a set amount, might be a good option.
If you are splitting 50/50 here’s what I’d do. Figure out what he needs per week and pay him that, then at the end of the project pay him 50% less advances paid. Just don’t give him too much weekly, as little as possible, just to be sure he doesn’t skip out on you. You can also try to keep it on time and moving along by making his weekly payment conditional upon a certain milestone in the project. Example- He doesn’t get paid this week until the carpeting is done and the interior is painted.
Rich’s advice is right on the money.
If you don’t set milestones for these guy’s they’ll suck you dry. I like to break the work down into phases. First phase demo = X amount of dollars, next phase plumbing and electrical =X amount of dollars, sheetrock and paint = X amount and so on and so on.
I buy ALL my material…Want to MARRY a contractor???
No better way I know of than letting THEM buy YOUR materials.
THEY have material= I WAIT FOR THEM
I have material = I DON’T WAIT FOR ANYONE!!! YOU NO SHOW, YOU ALL DONE, See that new guy over there?? HE’S YOU 2 days ago!!!
Here’s your check bye bye.
i would not do 50/50 profit unless he came came out of pcoket for materials and covers his own income. If you have to buy the materials and then pay some income to him, then why are you giving such a large chunk of the profit ??? to him as he is just a hired helper. Otherwise, you should get round up a private investor/HML.
Thanks guys! Think I might go to “fixer upper, must sell, 38K”! I still make a profit with less work. The other options of splitting with the contractor seems to put me their anyway after paying the original loan.
I’m also thinking, $5000 makes it rentable with cheap paint and carpet, little cosmetics, put in a tenant collect $1000 month from 5 bedroom unit. Call the bank take out an additional $25,000 to keep because I can. Have tenant rent pay the entire loan $500 month. Collect monthly cash flow, hold the house, hire a property manager. Move on to options for awhile using the time to repair all credit issues and lower debt ratio. Move back into buying rentals but giving tenants a two year period to buy with me holding the owner financing. A sure way they will pay their rent. Boy did you guys teach me alot in two weeks.
Thanks again I’ll make my decision by next week.