Updated about 13 years ago on . Most recent reply
contracts
I will be taking a hard money loan to fund a project my contractor has brought to me. The loan I take will be the primary source of funding and bank loans will be taken out as the project progresses on the value of the property. My contractor says that we will start a corporation to protect everyone involved. he says that him, his mentor, and I will form this corportation together. I have a lot of questions, should i talk to a real estate lawyer? or is there someone i can call?
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#2 Private Lending & Conventional Mortgage Advice Contributor
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It sounds like you are funding the deal and your contractor will be doing the work? In this case you absolutely need a lawyer and a CPA to help you structure this. You are taking all the financial risk and should have 100% ownership of the property, as your lender will allow.
Taking title in a corporation owned by you and your contractor gives him control and a percent ownership that you alone are on the hook to pay. What if he walks or you’re otherwise unhappy with the relationship?
I am not a lawyer, but you likely want to take title in a corporation you solely own with a partnership agreement between your corporation and that of your contractor, if you intend to split the profits with him. If not, then all you need is a construction contract between your entities where you pay your contractor and keep the profits in your corp. (By the way, in the US you might consider an LLc.)
If you’ve never done this before, you really need professionals help to protect your interests. It's not complicated, but you have no reason to believe he or his mentor are looking out for you, Valerie.
Jeff