OfflineHi, We'd like to invest in a rehab property, (through our LLC), with trustworthy acquaintances, but would like to get a written agreement in place. This couple has purchased the property for $185k with hard money and have put in $40k out of pocket so far toward the rehab with another projected $40-$50k needed for completion. There are 2 other silent investors who have put up $30k each. We're coming in late to the party.
We'd put in $35k and have equal say with the owners in all aspects of oversight of the rehab process, staging and selling decisions. The net profit would be split 25% for all. Is there a standard contract available that would cover this relationship or should we consult our attorney. All parties are in Arizona. Thanks in advance for any advice we can get.
Michelle & Frank Reynolds
Seems like NET profit would have to be $140,000 to get your initial investment back.
Michael
Knowledge is power, but execution trumps knowledge. Tony Robbins
http://www.mdhomeacquisitions.com Seller site
http://www.mdhomeacquisitionsbargainhouses.com Buyer site
http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
What is the ARV and how much profit are you talking about splitting? If it needs $40-50k for completion and you are putting in $35k late to the party, where is the other $5-15k coming from? So if repairs are assumed to be $150k with a purchase price of $185K, if you apply the formula of 70% of ARV - repairs = max allowable offer, the ARV should be in the neighborhood of $480,000. That would indicate an initial purchase price of 39 cents on the dollar. Will the property be worth $480k after it is fixed up? $140,000 is a lot of repairs for a $480k house. Fire damaged? How much experience do the buyers have in rehabbing properties? I would question why they would enter into a project without all the financing for completion already in place after incurring the time and expense associated with hard money. With a cash purchase, they would have the luxury of time. With hard money, they must meet the timeline for repayment. What is their plan B if you don't contribute $35-40K ? You need to take a hard look at the numbers. Just my opinion and I may be wrong.
I have 2 contracts on 2 properties right now . 2nd and 3rd from the same seller . Though
I advertised the properties at what I believed to be fair prices I'm not getting any responses . Can someone give me a few ideas to help me move these houses ?
Dave