Plano, TX · Member since 2017 · 15 posts · 2 votes
Hi,
I've pooled together a few investors and want to do a flip or buy a rental using their investment. My question is, how do I structure the deal with them? Should I form an LLC with them as partners?
I know this is probably a question for an attorney and I do plan on consulting with one and getting everything nailed down before touching their money. But I wanted to get some feedback from the community first. Thanks
Rental Property Investor · Vancouver, WA · Member since 2014 · 113 posts · 29 votes
7y
I would base it off what the investors want for their money. If they want a return on the investment, I would not put have their names as part of the business. That would be separate documents regarding their interest in the property based on their investment. The important part to me is to consider the connection that is made when you form an LLC and how that can influence the outcome if things don't go as planned. Not that they will. Also, I would consider what the goal is in the end, making arrangement for a flip is definitely different than buying and holding a property for rental income.
They're definitely wanting a return on investment rather than a partnership. The issue is a lot of them have the preconception that an LLC is the only way to do business, I could've done a better job at managing these expectations. Do you know what kind of documentation is required for investors?
Rental Property Investor · Vancouver, WA · Member since 2014 · 113 posts · 29 votes
7y
Depends on how you decide to structure. If it is a Join Ventur, that would be different than them supplying funds in a lending capacity expecting a return. If they are in search of an ROI, you could draft a not showing their interest in the property should you fail follow the terms of the note.