Newbie Looking for Advice
Good morning BP World,
I have some exciting and nerve racking events on the horizon and I need some advice!
First let me start by saying that I am a 22 year construction professional. I have worked, quite successfully, for a national home builder as a production manager and with my contacts and sub contractor relations I believe I have the tools and knowledge to build/develop homes efficiently and lucratively. I have recently moved to West Texas where the oil boom has created an opportunity for to me go into business for myself so I have started looking into the LLC and insurances required.
I have researched land, home prices, and labor/material cost in the area and there is definitely a benefit to build here. I have spoke to a few small time investors through this process to purchase land to develop with interest but little moving forward. The sense of urgency is critical as each day land diminishes as well as opportunity. Land is scarce. I have contacted an investor that sees the potential value and has decided to move forward with me. After discussing the scenario with him he says he does NOT want to just invest but wants to "Partner" with me and my company! He has put down a deposit/offer on a parcel of land and now excepted the counter offer. This has created a "Rainstorm" as the other 2 investors have now stepped up to the plate!!! I now have 3 investors, 3 parcles of land, and 3 different products to develop. Let me explain...
1) Investor #1 will fund 100% and has purchased land to accommodate 10 single-fam residences. Land = $47,500, street, curb/gutter = $75,000, and cost of development = $150,000 ea. Total development cost for each home is $162,250 (Including land and street cost for all 10 lots) Anticipated selling price of each home is $200,000 leaving a profit of $37,750 each home. Concern...
**I need to pay my personal bills and put food on the table during the development process! It has been suggested to me to ask for 10% of cost = $16,225 and 5% of profit = $1,887 for a total of $18,112, leaving the investor $19,638 profit. IS THIS FAIR/STANDARD??? How should I consider setting up our partnership??? General Partnership/Limited Partnership??? What are the pros/cons???
2) Investor #2 offered me 75% as he will retain 25% and will also fund me 100%. (Which I think is amazing) Land = $17,000 and accommodates 2 single-fam residences. Development cost is approx. $220,000 each and selling price will be approx. $320,000 each. He will NOT be a part of my company as with investor #1! Concern...
**Do I create an LLC for this project and property??? If so how and why???
3) Investor #3 will be similar to investor #2 except this will be a multi-fam project and a different %. He will also fund me 100%. Land = $13,000 and will accommodate 2 single story triplex buildings. Development cost is approx. $320,000 and 6 condo units will sell for $80,000 each for a total of $480,000. Concern...
**Do I create an LLC for this project and property??? If so how and why??? What is a standard % for this type of relationship???
HELP!