Zim
01-09-2007, 10:17 AM
I am seeking some advice from an experienced flipper on a partnership I am trying to form.
We both have something to offer to each other which is a key factor in doing this.
Here's the situation: I have 20 years experience as a builder, mostly new homes. I want to get out of this. Securing lots in my area has gotten too difficult and costly, and I hate dealing with customers and their emotions. I have 7 years experience running my own home inspection business. I am just tired of both and want a change. I am also going through a divorce and my credit was ruined. My cash is very low until I sell off 4 lots I am developing. I have one carpenter I've known for 15 years who is willing to use his excellent credit and do some flipping with me, but he does not want to put up any cash.
However, recently I've done some work for another party who would like to make some kind of arrangement with me to flip full time in partnership. We've talked a lot and this person is a straight forward businessman I like. I've screened him very well over the last month. What he brings to the table is this: He has about $75,000 cash to start with and enough credit to flip 3 houses at a time. He has a window replacement company employing 18 carpenters. He has previosuly flipped 7 HUD homes, for as much as $30,000 profit.
He would like to flip more but has his hands full with his window company, thus he approached me because he knows of my construction and inspection experience, and willingness to supervise our jobsites fulltime. He has the employees who could do any demolition and labor at our projects at my instruction. I really like this as we could get things done quickly and I would not have to deal with labor subs or employees if I flipped on my own. He has a realtor uncle who bird dogged the deals for his previous 7 flips. I really like the idea he has done these flips and feel good about getting some guidance in this. He likes I am an inspector and can evaluate renovation costs easily (I am good at it). I also am a skilled carpenter and can contribute in that way to fill in if I need to.
What I need the advice on is what you guys think would be a good way to set up this thing and fairly split the proceeds.
He's mostly just going to finance and make the emloyees available at a cost we will determine based on his expenses.
I will be inspecting potential properties suggested by his uncle, crunching the numbers and making the recommendation to my partner. I'd completely supervise each project, subcontract, & do skilled carpentry tasks if time permitted.
Now I just need to figure out a good way to set this up. One option would be for me to get paid either a fixed fee or hourly to do the supervision, then get some cut of the profits. The other option would be for me to simply contribute my time to do the supervision (since I'm not contributing cash) and take a higher percentage of the proceeds. Does anyone have a suggestion what they think would be fair? I have absolutely no idea what percentage of profits would be a fair split given either of these scenarios. Thanks for any advice.
We both have something to offer to each other which is a key factor in doing this.
Here's the situation: I have 20 years experience as a builder, mostly new homes. I want to get out of this. Securing lots in my area has gotten too difficult and costly, and I hate dealing with customers and their emotions. I have 7 years experience running my own home inspection business. I am just tired of both and want a change. I am also going through a divorce and my credit was ruined. My cash is very low until I sell off 4 lots I am developing. I have one carpenter I've known for 15 years who is willing to use his excellent credit and do some flipping with me, but he does not want to put up any cash.
However, recently I've done some work for another party who would like to make some kind of arrangement with me to flip full time in partnership. We've talked a lot and this person is a straight forward businessman I like. I've screened him very well over the last month. What he brings to the table is this: He has about $75,000 cash to start with and enough credit to flip 3 houses at a time. He has a window replacement company employing 18 carpenters. He has previosuly flipped 7 HUD homes, for as much as $30,000 profit.
He would like to flip more but has his hands full with his window company, thus he approached me because he knows of my construction and inspection experience, and willingness to supervise our jobsites fulltime. He has the employees who could do any demolition and labor at our projects at my instruction. I really like this as we could get things done quickly and I would not have to deal with labor subs or employees if I flipped on my own. He has a realtor uncle who bird dogged the deals for his previous 7 flips. I really like the idea he has done these flips and feel good about getting some guidance in this. He likes I am an inspector and can evaluate renovation costs easily (I am good at it). I also am a skilled carpenter and can contribute in that way to fill in if I need to.
What I need the advice on is what you guys think would be a good way to set up this thing and fairly split the proceeds.
He's mostly just going to finance and make the emloyees available at a cost we will determine based on his expenses.
I will be inspecting potential properties suggested by his uncle, crunching the numbers and making the recommendation to my partner. I'd completely supervise each project, subcontract, & do skilled carpentry tasks if time permitted.
Now I just need to figure out a good way to set this up. One option would be for me to get paid either a fixed fee or hourly to do the supervision, then get some cut of the profits. The other option would be for me to simply contribute my time to do the supervision (since I'm not contributing cash) and take a higher percentage of the proceeds. Does anyone have a suggestion what they think would be fair? I have absolutely no idea what percentage of profits would be a fair split given either of these scenarios. Thanks for any advice.