Is this Handyman and RE Agent Flipping Deal Fair and Common?

[Nir]

Hi All,
A good friend of mine is a handyman in Toronto. Recently a RE agent he worked for in the past, suggested the following deal to him:

- RE agent buys a property by arranging financing and putting the down payment required.
- handyman is on title (for tax purposes)
- Handyman renovates/improves property. say 2 months work.
- Handyman and RE agent share material costs only 50/50
- Renovated property is sold by RE agent
- profit after paying RE agent his initial financial contribution (down payment), is shared 50/50.
- Handyman did no get paid for 2 month work (except material was shared 50/50 as mentioned)
and RE agent did not get paid for arranging everything and no fee when selling.

Is the above a common and fair flipping deal OR should the handyman also get paid for his 2 months work (say $5k-$10k) in addition to sharing profit 50/50?

THANKS.

 

[invst4profit]

Each partner is bringing something of value to the deal. The RE agent has the cash to provide the down payment, the handyman provides the skill and labour.
If the handyman had the cash himself he would not need the RE agent.

It is a common arrangement.

 

[housedoc]

QUOTE (invst4profit @ Nov 23 2009, 12:52 AM) It is a common arrangement.

To avoid taxes.
To save on reno costs/quality.
To suck maximum $$ out of a deal.

It`s no wonder average people have to overpay.

At what point do agents cross the line?

 

[invst4profit]

The value of a property is driven by the consumer not the seller.

As far as making the maximum out of a business deal as possible how can you fault what is basically a good business policy. There was no mention of cutting corners or scrimping on quality in the structure itself.


Average buyers are not forced to pay any more than they want to. No one is twisting there arm they do it voluntarily and by paying too much they are causing inflated prices not the seller for asking too much.
Everything is consumer driven.

 

[RedlineBrett]

QUOTE (invst4profit @ Nov 23 2009, 09:02 AM) The value of a property is driven by the consumer not the seller.

As far as making the maximum out of a business deal as possible how can you fault what is basically a good business policy. There was no mention of cutting corners or scrimping on quality in the structure itself.


Average buyers are not forced to pay any more than they want to. No one is twisting there arm they do it voluntarily and by paying too much they are causing inflated prices not the seller for asking too much.
Everything is consumer driven.

Agree with this post 100%.

Nothing wrong with this deal at all.

If the handyman wants $ for his time and trouble the RE should charge the partnership what he would have made on the listing fee. I see this as a pretty fair deal... I hope they did well!

 

[Alvaro Sanchez]

If I were the handyman, I would charge a base salary (fixed salary or x number of hours)... there is a risk of working for free if there are no profits... I kind of do the same but I build software. I provide a better rate if I will have profit sharing otherwise I charge full rate.

 

[vandriani]

I would also suggest that they get some sort of aggreement in place to avoid issues of misunderstandings. A modified JV agreement worked out by a lawyer(s) would suffice.

 

[Nir]

Thank you everyone for the quick responses and great input!

 

[cm24]

Exactly what I would love to do! I would do it if the handyman really is handy and has skills (construction, organization, leadership) that can add up to 50% of the deal.

 

[JeffSmith]

As mentioned this is essentially a JV between a money partner and a renovation contractor. I have been the renovation contractor for these types of deals and I have found them to be fair and profitable. I would also add that in addition to the materials, any professional trades costs for plumber, electrician, flooring installer etc. be split 50/50 as well.

 

[Nir]

QUOTE (JeffSmith @ Nov 25 2009, 10:21 AM) I would also add that in addition to the materials, any professional trades costs for plumber, electrician, flooring installer etc. be split 50/50 as well.

Thanks Jeff. what about say 2 months of work the handyman puts himself? would you not charge for that if you were the handyman?

 

[Thomas Beyer]

QUOTE (investmart @ Nov 22 2009, 10:05 PM) ..
Is the above a common and fair flipping deal OR should the handyman also get paid for his 2 months work (say $5k-$10k) in addition to sharing profit 50/50?
seems fair to me ..

related post:

50/50 – is this fair ?
http://myreinspace.com/public_forums/Real_Estate_Discussion/62-2015-5050__is_this_fair_.html

 

[invst4profit]

QUOTE (investsmart @ Nov 25 2009, 10:49 PM) Thanks Jeff. what about say 2 months of work the handyman puts himself? would you not charge for that if you were the handyman?


The free labour is the handyman`s 50% he brings to the partnership.
If he were paid for his time he would have nothing invested in the partnership but still expect 50% of the profits.

 

[Nir]

QUOTE (invst4profit @ Nov 26 2009, 09:01 AM) The free labour is the handyman`s 50% he brings to the partnership.
If he were paid for his time he would have nothing invested in the partnership but still expect 50% of the profits.

Good point Greg. thanks.

 

[Anonymous]

Absolutely fair and common.
I have done many of these deals before and have been happy with the results. As long as they are completely honest and communicate with eachother, both parties will complete their end of the deal to the best of their abilities. Have a legal contract drafted to ensure they know their responsibilities/obligations. Peace of mind is priceless!