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what would be a fair split?

KhoaN

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let's say if someone is experienced with reno and flip finding a suitable deal. I fund the down payment and finance the mortgage under my name. We then put in 50-50 for the cost of reno. He is incharge of the reno by hiring contractor and might put in some work himself. In this scenario, what would be the fair split on the profit?

Thanks,
 

Thomas Beyer

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let's say if someone is experienced with reno and flip finding a suitable deal. I fund the down payment and finance the mortgage under my name. We then put in 50-50 for the cost of reno. He is incharge of the reno by hiring contractor and might put in some work himself. In this scenario, what would be the fair split on the profit?

Thanks,

I’d say 20% to 30% depending on ratio of reno costs to down payment.


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 
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Thomas Beyer

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Could you provide some insight as to how you reached your suggested numbers?



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See here
Red, green and blue money - what are the three crucial elements of real estate and JVs: http://myreinspace.com/threads/blue...expert-deserves-to-make-some-money-too.29091/

A general contractor makes 15-18% on the reno costs. If reno costs are similar to down payment then use the 20/30/50 formula and take 50% of 50% of 50% for money portion plus 40-50% of expert portion. So 12.5% plus 15% perhaps. Lower if reno costs lower, say 20%. Closet to 30% if big reno.

What is the overall lift, the down payment and reno costs?


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 

KhoaN

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Thanks Thomas!
The down payment plus closing cost is around 90k and total reno cost is around 80k. So I'd put in 130k and he puts in 40k.

So did you mean 30% of profit to him?

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Thomas Beyer

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Thanks Thomas!
The down payment plus closing cost is around 90k and total reno cost is around 80k. So I'd put in 130k and he puts in 40k.

So did you mean 30% of profit to him?

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Unclear what the profit potential and risk is. On an 80k reno the general contractor fee would be 12-15,000. Does he do a lot of the actual reno work? Ie 80k is just material ? If so, then yes 30% seems reasonable. If 80k includes a lot of third party labour then less, closer to 20%


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 
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KhoaN

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Unclear what the profit potential risk is. On an 80k reno the general contractor fee would be 12-15,000. Does he do a lot of the actual reno work? Ie 80k is just material ? If so, then yes 30% seems reasonable. If 80k includes a lot of third party labour then less, closer to 20%


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com

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Oleksandr11382

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Unclear what the profit potential and risk is. On an 80k reno the general contractor fee would be 12-15,000. Does he do a lot of the actual reno work? Ie 80k is just material ? If so, then yes 30% seems reasonable. If 80k includes a lot of third party labour then less, closer to 20%


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
If I understand correct his partner find a deal an managing reno. Khoan provides mortgage and half of reno money only.
"let's say if someone is experienced with reno and flip finding a suitable deal".
It seams for me his partner do most of the work. Should not him get more then 30% in this case?
 

Thomas Beyer

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If I understand correct his partner find a deal an managing reno. Khoan provides mortgage and half of reno money only.
"let's say if someone is experienced with reno and flip finding a suitable deal".
It seams for me his partner do most of the work. Should not him get more then 30% in this case?
Oh I see now. The reno partner is also the guy finding the deal. Then yes, that has value, perhaps as much as 10-20% more .. so in this case perhaps 50% is the right split then, more or less
 

Caleb West

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15-18% contractor profit is very low if there is a legit company being run with all Insurance’s , liability , Wcb, safety , management , admin etc. I could see it if it was a solo show but those are tight margins.


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Thomas Beyer

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15-18% contractor profit is very low if there is a legit company being run with all Insurance’s , liability , Wcb, safety , management , admin etc. I could see it if it was a solo show but those are tight margins.


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A GC ( general contractor ) takes about 15-18% of actual cost of construction. These are industry norms. This assumes the owner of course funds it all incl 50% of the actual material upfront, and then monthly and actual material, labour & GC invoices as it gets installed.

This deal here assumes the GC also puts in cash, forfeits his 18% GC in lieu of share of equity AND by finding a suitable asset. As such likely a 40-50% profit split for GC.


Thomas Beyer, Asset Manager, Investor, Community Improver, Author, Father, Mentor www.prestprop.com
 
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