Finding the right partners may make or break your business!
You may remember in one of my previous blogs I emphasized the importance of partnering with the right professionals. You need to determine your needs or weaknesses and find someone you trust that is skilled in these areas.
We recommend partnering with an experienced house flipping Real Estate Agent and very skilled General Contractor. Having a great General Contractor can save you from making a poor investment decision. Utilizing an experience Real Estate Agent in house flipping can spot the best property investment buys. Some real estate agents have actually flipped houses themselves, so ask the obvious to your agent. What is your experience in finding houses to flip? Or, have you ever flipped a house?
Once you find an agent, help them to understand the type of properties you are willing to consider:
- In side the city
- Suburban areas
- Price Range
- Type of Flip (major, minor, etc)
- Distance you are willing to travel
You get the idea! Your real estate agent is so important to your business and should be treated as an asset in order to make the right investment decision.
On the other hand, you will want to get a more formal agreement or contract with your General Contractor. First, meet to agree on the general terms of the arrangement. Second, discuss how the General Contractor will be compensated (% up front, labor & materials, or maybe a percentage of profits). There are many different types of arrangement that might work well for your business situation. You must also consider whether you want to use legal council during your arrangement. For many, this comes down to how well you know the person, but friendships can be ruined by not having a very clear - well spelled out agreement. Many software packages offer Home Remodeling Agreement of sorts that may or may not meet your needs.
An Interesting Story.
One quick story. I have a friend let's say his name is "Bob". Let's protect the wounded. Bob was the financial property investor and bought a great fixtoflip property with his General Contractor (GC). Bob and the General Contractor were friends and agreed to purchase a rehab property investment together. Now, Bob decided he knew the GC well enough to not have a formal contract or agreement. Also, they agreed to have a kitty of money for the GC to pull from for his labor pay and material costs. Unfortunately, they did not have a good system in place for tracking all of the receipts. You can see where my story is heading.
I'll cut to the chase. The property needed much more work than was anticipated and the whole job took 3 additional months to complete, beyond their projection. The total time was 6 months. They went well over their budget and now need to sell the property immediately. His friend the GC feels they don't need a real estate agent and can sell the property themselves, which is very difficult with this tough market. The GC also wants 50% of the profits, but does not want to account for the labor dollars that were already paid out for his time. Now, we all know this is quite an unusual case, but drives home my point on the importance of an agreement!
Bob asked for my advice and my suggestions were:
- Get a Real Estate Agent immediately, so you can move this property. It looks great, but they might have trouble recouping their total investment.
- Get a mediator to discuss the issues with the GC and try to reach an agreement with the money paid out versus the profit in the property. Once agreed, get it documented and signed immediately.
- They need to get the property noticed, so it can move quickly. Try marketing the property through a video to generate more market visibility. I suggest using AgentCasts. They produce high quality videos and they distribute your property to over 30 websites. The emphasis was to drive more attention to their property listing by marketing it much broader method.
- Don't do business with Bob again! I had a chance to meet Bob and he does not know the meaning of being reasonable.
What has been your experience with partnerships either good or bad? Please share your thoughts to help others.
Dan Dunleavy President, FixtoFlip Inc (954) 889-7092
http://www.fixtoflip.com/ - The Tools and Resources you need to Fix and Flip Real Estate Profitably!
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Other Blog Entries:
(House Flipping) A Newer, Smarter, Flipper
Flip Tips (House Flipping or Rehab)
FixtoFlip.com has a New Integration for Adding House Flipping (Rehab) Properties.
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