There is Countless ways to make money Turn home over, and generally in real estate. If you look at the author’s biography on this blog, you can see what I mean.
Some Bigger Pockets bloggers work as short-term real estate agents, investors, and consultants for real estate investors. Others do rehab, retail, and some wholesale. Of course, the list of ways to make money with real estate is growing.
One thing that many Bigger Pockets bloggers have in common is that real estate has changed their lives in ways they never imagined. No matter how you make money in this business, if you stick to it, it will change your life (hopefully better!).
Needless to say, creativity can take you far in this business. For me as a house flipper, creativity can connect seemingly impossible deals.
This week I would like to talk about a particular deal that I rarely did. Fortunately, I was able to be creative, think out of the box, and make this particular deal work.
How to make money by partnering with a general contractor
There are many ways for partners to do home flip trading. In this particular flip, I partnered with a general contractor.
I recently came across a transaction in Massachusetts that caught my attention. The asking price was $ 81,000, but my numbers worked so the maximum offer allowed was $ 71,000. Therefore, this transaction did not fit my investment model and I decided not to pursue it any further.
After a while, in the course of my life, I came across a friend who works as a general contractor. I mentioned this particular transaction that didn’t fit my investment model. In other words, I told him I wouldn’t be able to make a profit on this flip based on the purchase price of $ 81,000 and my estimated repair cost ($ 55,000).
Well, we talked for a while and agreed to partner on this deal, split the profits into 50/50 and both can leave with some money. The reason this arrangement works is because he intended to come in and do a lot of manual work himself. This will significantly reduce rehabilitation costs.
Besides, he also intended to manage the entire refurbishment. He managed a plumber, an electrician, and a roofer. In addition, he negotiated all contracts with those individual contractors.
By doing so, we were able to reduce rehabilitation costs from $ 55,000 to $ 34,000.
How numbers work
According to me 70% rule calculation, I would ideally buy this property for $ 70,000 to $ 75,000. However, thanks to the GC partnership, we were able to significantly reduce the estimated cost of repairs. Suddenly the deal makes sense.
Please let me explain…
Ultimately, we predicted that the selling price would be between $ 175,000 and $ 180,000. Take that price and subtract the $ 34,000 repair cost, the estimated $ 20,000 soft cost, and the $ 81,000 purchase price, leaving you with a profit of $ 45,000.
Of course, for the partnership, we split that $ 45,000 in half. This leaves a profit of $ 22,500 for both GC and me. This is quite suitable for transactions that you rarely make.
What’s really great for me as an investor is that I didn’t have to do anything about renovation on this project. My GC processed the entire show, and I just occasionally appeared with coffee for him and his crew.
One thing to keep in mind when making such a transaction is to partner with a good general contractor. It really helps if you have honest and trusted friends and trusted introducers.
Remember that you rely on the GC to get the job done within the time he or she said it will be accomplished. The GC also needs to know the cost accurately. There is really no excuse when making such a partnership agreement, where the rate of return can be very low.
The conclusion is
This experience harnesses the creativity of real estate and I would like to share it with you. This is just one way to be creative. There are many ways to put together a profitable transaction.
If you can give someone an opportunity to help you start a deal, you can both make a profit and leave. All you need is credibility, credibility, and unconventional thinking.
How did you organize your real estate transaction by becoming creative?
Photo: Ignorant walking