Looking to start LLC to buy flips with some partners.

Member since 2018 · 5 posts · 0 votes

Have about 4 or 5 buddies that have some capital they are looking to invest, looking to start an LLC and buy properties with their investments and fix to flip. How do I go about this the right way, I'm having trouble figuring out my next step and where to go next. An info will be greatly appreciated!

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Scott SmithPro Member

Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes

Hey Christopher,

Welcome to the BP community! This is a very vague post, so I don't know what type of advice you are asking about. Questions I would ask before giving advice would include:

1. Do you already have experience in real estate investing? Specific to fix-and-flips?
2. How well do you know this group? Have you worked with any of them in a professional manner in the past?
3. Are you asking about how to find deals? What entity to form to establish this partnership?

These are just a few questions I have. If you can answer some I will try swing back and offer some feedback! Also, be sure to type "@" Scott Smith to tag me when you response (or just use the "quote" option) so that I get informed when you respond.

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Scott SmithPro Member
Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
7y
Hey Christopher,
Welcome to the BP community! This is a very vague post, so I don't know what type of advice you are asking about. Questions I would ask before giving advice would include:
1. Do you already have experience in real estate investing? Specific to fix-and-flips?
2. How well do you know this group? Have you worked with any of them in a professional manner in the past?
3. Are you asking about how to find deals? What entity to form to establish this partnership?

These are just a few questions I have. If you can answer some I will try swing back and offer some feedback! Also, be sure to type "@" Scott Smith to tag me when you response (or just use the "quote" option) so that I get informed when you respond.
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Account Closed
Investor · United States · Member since 2018 · 565 posts · 356 votes
7y
Christopher,
https://klasing-associates.com/question/advantages...
This may help.
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Christopher Taylor
OP
Member since 2018 · 5 posts · 0 votes
7y
Hey @Scott Smith thank you for taking time to reply! At this time I do not have any experience in fix and flips but some members of the prospective LLC are contractors and home remodelers so our hope is that they will be able to do the work for our team. This group of friends I've known for about 10 years or so but have not worked professionally with them. I'm asking mainly about the type of entity I should form that would allow us to invest but protect our personal assets and maximize tax benefits. Since I am new I'd love any insight around finding deals as well. Any information is much appreciated, thanks again!
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
7y
@Christopher Taylor

While you are all friends; you should treat it as a business.

With that said - the first thing you want to do is draft up an operating agreement/partnership agreement and an entity.

The agreement should mention items some of the following items
1. Profit/Loss split among partners
2. Exit plan
3. Who will be managing the day to day business
4. What happens in the event of an unforeseen event(death of a partner/member)
5. Who will manage Admin work/Taxes/K-1's
6. etc
From there, you and your friends should target a market and then contact lenders/contractors/realtors
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Javier D.
Investor · FL · Member since 2017 · 266 posts · 220 votes
7y
@Basit Siddiqi
To piggy back on this great advice:
Figure it out and have it very clear how profits will be dispersed. If one of the partners is the contractor and another a real estate agent then how will they share profits? Will their primary business profit be separate from the flip profit? Will they put their commissions/construction profits back into deal? I’ve seen and experienced these issues break up friendships and cause these types of JVs dissolve.
Good luck!
Bank account with multiple signatures
Clear cut managing member ownership interest %s
If you can get your hands on volume of properties in your market then look into HMLs to compound amount of properties you are working same time.
More green less sweat in
Less sweat more green in
Good luck!
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