Buying Real Estate with Friends 8+

[Chanel Alexander]

Hello All! 

Hopefully someone can help me with this.  I have gathered a group of my close friends (about 10 people so far) and we are pooling our money togehter in order to make a real estate investment. Ideally the money we pool together will serve as the downpayment on a Multi-Family property and we would finance the rest.  Does anyone have experience doing this kind of arangement? How do people usually finance as banks are keen on lending to multiple individuals. 

Also, If this group is going to be an ongoing concern does it make sense to turn this into a LLC or REIT and not just a partnerhsip.

I would love to hear any thoughts. 

The group is split betwen NY and NJ (for reference)

[Chris Seveney]

@Chanel Alexander - god help you. If you do not have an LLC setup already and how the money gets distributed etc then you are asking for a lot of trouble. As who controls setting market pricing,management, tenant selection, what if someone has a hardship and wants out of the deal 12 months from now and equity has increased or decreased substantially.

Also you most likely won't find a bank to lend to 8 people who may be on the deed etc

I would recommend you first start with a really good lawyer. 

To answer your question though, I would recommend setting up an LLC as you as the owner and have a joint venture agreement with each individual outlining the terms and conditions. That way you are in control and they are passive. Again you will need a lawyer to confirm it is legit in state of doing business etc