Good morning people, it is 2:22 a.m. and I have spent the last 3 hours roughly wandering the World Wide Web and bigger pockets trying to find out about others investing with me. So here's the scenario.
Ijust started investing in real estate last year. I own a 50% split in a LLC holding a apartment complex, own a couple of single-family homes and 2 commercial properties. Multiple friends and family have approached me wanting to invest their money as I continue to expand.
Ironically most to my deals to this point have been no money down either owner financed or a hundred percent financed through Community Development grants combined with traditional loans.
There is of course minor startup costs as well as time and other expenses that I am covering to set these up. Now to the questions and the deep water....
If I have a property that's worth $160,000 the bank notes and financing are at 100% so I owe $160,000. The out-of-pocket expense for insurance and other incidentals are roughly $4,000.
The monthly Finance cost is roughly $1,300 with total expenses monthly of $1,800. Income is at 3200 per month. And no this is not a single source 1 income so while there may be a drop it won't be a massive significant hit if I lose a few customer. But I digress...
Legally I know I can set up a LLC witb multiple partners, that's easy enough to do talk to the lawyers blah blah blah. What I don't know and have not figured out is how to split the ownership and shares. I spend my time, money and "sweat equity" they put in 2 to 10k and the bank finances most of it... but how do I figure out what my time was wWhat my time was worth as a percentage of the value.
To make it worse in the example above, a fully-funded property that values at $160,000 with $160,000 of outstanding loans and $4,000 of incidentals on top of that ends up with a startup value of negative $4,000.
I'm probably making this way too complex but do I really have an LLC that is fully financed and I spent $4,000 above that for incidentals yet cash flows $1,400 a month above expenses. And once I figure out the answer to that if two investors covered that $4,000 do they own 50% each, what about my sweat equity?
3 years from now when the next property is bought can we just add additional investors by dividing the current company value against what they want to invest? Say company value after liability is $10,000 and somebody wants to invest $1,000.
Simplified with $1 Share value
Investor 1 has 50%
Investor 2 has 50%
New investor wants to invest 10%
Now #1 and 2 have their 5000 shares (45.5%) and #3 bought 1000 shares (9%)
I know a lot in one post.
Outside investor's are friends and family. I know telling them no would be easier especially when everything is already funded. But my success isn't my income and freedom. Success is helping those I love have better income and more freedom.
Thanks for taking the time to read that book...
Enough rambling... bring on the knowledge....