I have 2 properties in a series LLC (both in different child LLCs, none in the parent LLC), I'm looking to add a 3rd property in its own series LLC, but I will be partnering with my brother on this property only as a 60/40 shared investment. Is it possible to do this without setting up a separate entity? Would it be better to have him as a lender of the down payment rather than as a part owner of the property?
we did just that in our (NV) Series LLC recently: created a new series where the investor is a member, without being a member in any of the other series. So I think it is possible if that's what you want to do.
Whether you take your investor on as a lender or as a partner will also have an effect on whether he gets any of the equity. If he's a straight lender, then he would just get interest payments but none of the equity when you sell (since he owns none of the company). We had a similar situation recently and ended up doing a hybrid model where the investor gets paid interest on his loan (but at a low rate, in our case 5%) but he also gets 25% of the entity, which means he gets 25% of any cash flow left after we service his loan payments (so his effective return could be between 6 or 7% for example on a property that has a 10% cap rate) and he gets 25% of the equity when we sell (or refi and buy more properties in the same entity), which is interesting for him as well because we typically buy properties significantly below market, and where there is potential for appreciation. We thought this model is pretty fair and aligns everyone's interests.
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