Posted by Brad (CA) on August 31, 2003 at 02:13:06:
I am wondering why the contractor doesn’t do the work and retail it to make the full profit.
I also never rely on anyone elses data (comps, etc) unless I have checked it all out myself, including driving by the comps and verifying those are the best comps available.
I am assuming the “she” you are referring to is the retail buyer (the other investor)? If you guys would enter a joint venture, then both of you would put up something of equal value, either money, rehab work or? If I am reading your post correctly, she just wants you to buy it, rehab it with your money and then she wants you to just hand her half of the profit? WOW…where can I get a deal like that!!!
It doesn’t matter where you get the money or even if you need money dto do this, if YOU are the one putting the time and effort and risk into this, you shouldn’t hav eto split the profit with anyone. Now, if you want the comfort knowing it is almost a guaranteed sale when you buy, you might want to negotiate to sell to her at a slight discount. Let’s say, 10% ($60K x 90% = $54K). That still leaves you with a good profit of $17K, she gets a house in rehabbed/ready to rent condition at a fair discount and everyone is happy.
Once again, she is asking for a handout, not a joint venture. If you think you need her to guarantee the sale because the houses don’t sell well in the area, then you need to figure that into the equation and decide if you want to even take the chance. But if houses do sell well there, then you really don’t have to give much if any discount. You might be able to market the house before it is even fixed up or even before you close escrow.
See if you can find the average marketing time for similar houses in the neighborhood.
It sounds like there may be a deal there but careful of the potential freeloader.