Need Guidance on Starting to Invest with Investor Assistance

[Bill Fennelly]

I am contemplating starting a partnership with 10 investors at $50,000 each to raise $500,000 to be used to acquire, renovate and re-sell residential homes.  I am both a real estate appraiser and broker with 25 years full-time experience and see opportunities all over the place...the problems is that I don't have the cash to get going and would look to investors for the financial assistance, as well as hard money lenders for renovation costs if needed...I am in the northeast and acquisition costs are high, for example the median price in my town if about $650,000 but neighboring communities see deals to be had around $300,000 plus renovations...any advice on starting with an investor group to fund the start up ?

[Ben Leybovich]

When bringing-in capital, there are two options: debt and equity.  Regardless of which direction you go, I'd work with Accredited folks...

Now - debt is unlikely unless you know of 1 individual able to fund the whole thing.  Any more, and someone is going to be in 2nd, 3rd position relative to mortgage and therefore security - never gonna happen.

Equity-wise, you can go with a simple LLC. This, however, would be a democracy with everyone having a vote to all things operations. Not sure you want to go there.

The alternative, howver, is a Limited Partnership, which in REI terms is a syndication. Reg D PPM. Here, you are the boss, and the LPs are there to contribute the $$. Setting this up is costly - PPM along with all accompanying docs and company formation will set you back 10k-25k.

Finally, if you haven't done this before, are you sure that this is the way to go?