Partnership financing

2 Replies

I'm trying to put together a small investor group of friends for a small multi family buy and hold in Sacramento. Due to the higher costs to get started here we will be using our collective funds for the down payment (25%) and closing cost and using a conventional loan to fund the rest. We all have stable, high paying jobs. My question is how do we go about structuring the financing and title? Would we put each individual on the loan and count each persons income and debts? Same for the title. Would it be better to just create a new llc and use that for everything? Any help is greatly appreciated.
Kris

Kristopher, If you are leading this party that is your call to make. There are many different ways to do it, all for good reasons, depending on what you want out of it and what everyone's risk tolerances are.

I will say this, the most likely way to do things would be to form an LLC to buy the property, have the LLC own the property and you all are as individuals "members" of the LLC.

The great thin about LLCs is that control and payouts can be different, Meaning you can have 51% of the power but only take 25% of the money.... or what ever.

One last bit of advice, always do everything knowing who is in charge even if thats not you. I one time approached someone about forming a partnership and said "lets do this and I will only be the 45% owner" that way there is never a 50/50 stalemate.

@Kristopher Pruitt is right. Contact an attorney in your area that sets up partnerships and invite him to lunch. Sit down with him and learn all the possible ways to set up the LLC . Also, make sure that there is only one person in charge of remodeling, if you get three people choosing granite, paint color, etc. They can have a say in the property you buy, however not in the details.

Hopefully that makes sense. You want to have one chief and lots of Indians in your partnership, otherwise the plan will not work well. :)

Lumi Ispas, Century 21 SGR | [email protected] | 773‑392‑2906

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you