I was approached with a deal where I would lend my credit and money in a JV with a proposed 90 day return of my money along with a 200% return funded by a refinance. I would remain on the title up until the time of refinance. Upon refinance, I would be effectively bought out and the partner would retain all remaining profits and 100% ownership beyond that point. I don't necessarily mind that. This is proposed to be passive for me with the partner managing the entire process. He claims he's done this previously which I would need to vet. His experience will be critical. One question that comes to mind is if he's indeed experienced, why does he need money? The amount of money being asked for isn't a ton ($ 15,000).

If the numbers are good why not buy it yourself and then offer him an option to buy it from you with the amount he promised you as the option price (15K+200% or 45K?) as your part for supplying the cash. If you are going to provide the cash plus the credit you might as well own it right from the start. Then have him manage it and do the repairs to earn his profit (no pay for this, just profit when he refi's).

A question I would have is if he can't get financing now and needs your credit, how will he qualify for financing in only 90 days? Doesn't credit repair take longer than 90 days?

Also, who will be paying for the repairs? Materials? Labor that he can't do himself? To realize a profit large enough to pay you plus pay for the repairs either this place likely needs a lot of repairs, which means subcontractors who must be paid or it's a very expensive house with a large difference between your buy price and the sell price.

Also, if he can't get one of those loans where the repairs are wrapped into the initial loan, who is going to supply the cash for the repairs?

As to managing the project and the repairs, is this person a contractor with a good record of doing projects like this? And if so, how come he can't get the loan from a bank with this experience?

What if he fails? Are you ready and able to step in and take over the project? Do you have subcontractors who can and will step in if it doesn't work? (In my experience, most subs don't want to step into half done jobs because they don't want the liability from the previous crew if there are problems).

"One question that comes to mind is if he's indeed experienced, why does he need money?"

My thoughts as well.

Not only that, why would someone only need it for 90 days but willing to pay a 200% return in that short period?

Richard asks many good questions.

I do know some very experienced, reputable folks who flip houses - and have for a very long time, using other people's money. Many believe that OPM is always better. So, that doesn't concern me - all by itself.

If they also need your credit, Richard's concerns about being able to refinance come into play. Although, perhaps, they have a source for a private, log-term loan.

200% for 90 days seems too good to be true.

More hard questions need to be answered.

Also, who will be writing the rock-solid partnership agreement that will protect you?

So you're providing the down payment AND your name will be on the loan? How much will the loan be for?

We've been involved in a deal or two like this, and have been turned down many more. I'm constantly amazed by how many experienced investors struggle with cash flow. Just because they've been doing it a long time doesn't mean they've been doing it well.

If the deal is a good enough one that you'd be happy if you ended up owning it, then go ahead. A deed in lieu will help you with this. Make sure your documents address all contingencies and that you'll be happy with the outcome regardless.

My general feeling, though, is that if someone is desperate enough to pay that kind of money, there's a problem hiding in the closet somewhere. I'd ask a lot of questions about their finances. And run a credit check.

In California, it is illegal as a private person to charge an interest rate over 12% (per year). So when a deal is structured and you're getting money paid back, you can not use terms like payment of 200% of you earnest money.

Looks like if they are borrowing your money ($15k) and your credit, what are they bringing to the deal?

It appears on the surface that the individual might theoretically use your credit and your $15k as a downpayment to get into a property.

Jerry--they're bringing a flip deal mainly because they apparently can't pull off on their own. As I think about it, this would need to be a 50/50 deal with more involvement on my end with them managing the repairs--and that assumes they have the capacity to do that. Alternatively, they could just wholesale the deal to me and get out. My problem is that my plate is somewhat full and I'm short on time.

I have sold a few houses to one investor. He just pays me 1k/mo until paid off. It works for him.

He approached me this summer inquiring about me purchasing a property outright and him buying it off me. He said that he would have a lawyer draw it all up for safety. He would either put me on the title or a lien so I was covered. In the event that something happened and he defaulted I would get the property. For liability reasons I would not want to be co-owner.

Thing is he buys D (or worse) places and rents them out as such. I do not want any place that he owns, and his PR is not up for grabs.

Would you be okay owning the property outright that this guy is trying to buy and flip?

Gman,

Tempting.

I've done this a few times where I owned or bought the property cash, no loan. Had to be a BIG margin for profit.

Formed an LLC to protect me against any of their troubles.

I was never a "silent" partner. I was the final authority and guide for decisions and actions. I visited the site frequently. We used MY realtor.

We split the PROFIT 51% me, 49% them, AFTER I was fully reimbursed and all bills paid.

As you know, flips always take waaay longer than expected.