BRRRR and Limited Partnerships

4 Replies

Hello everyone,

I've been in the game for about 3 years now and my primary business model is BRRRR. I have a very common milestone, I believe, which is to generate enough passive income to leave my W2 job. About two years ago, I sensed that I needed more education and context on real estate and I began reading books and listening to podcasts (none of the titles would surprise you I'm sure).

I'm at an interesting point in my journey where I have a few LLCs that are General Partnerships (all partners contribute to the day-to-day management of the business) and I would like to open a new LLC which would have a Limited Partnership structure (where the Limited Partners would just invest money while others would be General Partners).

For whatever reason, I can't seem to find the topic of partnerships in real estate being discussed at any significant length in anything I've read or listened to - even in the podcasts (although, I must admit, I haven't listened to all of them). I'm really looking for guidance at the intersection of Limited Partnerships and the BRRRR strategy.

-TIA

Igor

Disclaimer: I am not an accountant or attorney. I don't know anything about Limited Partnerships, but I do know that if you are taking in other people's money to invest in real estate, you should talk to a corporate attorney and one who is also familiar with securities laws. You may need a private placement memorandum or other documents to comply with SEC regulations. The best-known attorney in this field is Jillian Sidoti of the firm TrowbridgeSidoti (Disclosure: I have no direct knowledge of her or her firm and have no financial stake in promoting them)

I am not sure the detail you want, I have some blogs on Bigger Pockets that discuss the partnerships and LLC structures that do this with less risk.  I find I just read the different agreements and that helps me understand what is and isn't covered and the risks involved.

The series LLC is a structure that can limit risk to each BRRRR and adapt to differences in ownership between deals. Since there are many aspects to the series LLC agreement and the laws that support the structure, I have other articles in Bigger Pockets that may interest you.  I think you will find the limited liability structures are less risky than general partnership structures.

Thank you all for the response. I will do the research on the legal aspects. 

I was, however, asking more from the perspective of structuring the actual terms. For example, it is common, at least among my friends who flip houses, that they will take on an investor. The investor would put in all the funds and the builder would be responsible for managing and project. After the flip, and the investor gets back all the money they put in, they split the profits.

What kind of terms are common in the world of BRRRR?

-TIA

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