I have someone that is willing to passively invest in my real estate/rental company. Is it better to buy property as the sole owner of the company or should I bring on an investor.

Originally posted by @Spencer Dillinger :

I have someone that is willing to passively invest in my real estate/rental company. Is it better to buy property as the sole owner of the company or should I bring on an investor.

 It's better to do it on your own if you can swing it. Investors want to control or at least have input on how things are done. Some of the answer depends on who is more experienced, you or the investor. Opinions are a dime a dozen, Experience is worth it's weight in gold. Opinions are not Experience, there is a huge difference.

If you run into a deal that you *need* an investor for, that is the time to bring someone in. Make sure everything is in writing by an attorney. I would do a Joint Venture instead of a Partnership for legal and tax reasons.

@Account Closed What if the investor were to agree to invest through a LP with my LLC as the General Partner? Would a joint venture still be a better option in your opinion? For tax and legal reasons?

Originally posted by @Spencer Dillinger :

@Mike M. What if the investor were to agree to invest through a LP with my LLC as the General Partner? Would a joint venture still be a better option in your opinion? For tax and legal reasons?

Your investor can lend to your entity without much problem. That is a preferred way to do that type of thing.

However, when you have a Partnership, each of you has legal responsibility for something the other one does. One of the attorneys on BP mentions a client who was sued by an injured party because the partner had lent his personal car (it wasn't even the client's car) to a daughter who got into a car wreck unrelated to the property they had both invested in. A little convoluted I know, but when an attorney is looking to sue, he is looking for deep pockets and anyone associated with deep pockets. 

Partnerships are also difficult to break up when the time comes unless both agree and can agree on appropriate distributions. I personally can't think of an advantage partnerships have over Joint Ventures or of one investor lending to another investor. There might be some but the liabilities far out weigh the benefits and risks in my opinion. I am a very conservative, risk averse, long term, cash flow investor. That means I plan for the long haul and seek the highest return with the least risk. If that is your goal, use Joint Ventures or Private Money Agreements. If you like drama, use a partnership.

@Account Closed I really appreciate the advice. What incentive would the investor who is lending to me have to “loan” the money to me. Pardon me for asking so many questions.

I haven’t studied joint ventures as much as I should have. I will look into that. I just know my investor is looking to make use of his excess capital and wants to make a good and nearly certain return.

@Spencer Dillinger I have investors that invest in me/LLC not the property. I pay them like a hard money lender. I would try to get your investors to agree to those terms. I would even pay more to have them agree. If you are short on cash you can always defer interest.

@Spencer Dillinger

If this is your first investment; I would recommend purchasing it on your own if you can. Adding a partner does add some complexities.

If you have an individual who wants to invest through you; you have two alternatives.
He is loaning you the money
or
He is partner/member who will receive a percentage of the rental income

There are pro's/con's for you and the investor to do either alternative.

Investors may like the loan part as they get a consistent return yearly.
Investors may like the partner/member route as they get the benefits of real estate investments(tax benefits, real estate appreciation, loan paydown, etc).