Ive reached out to a few real estate attorney, still awaiting a response. So I wanted to run it by some pro investors on BP.
I am purchasing a property through a JV. My LLC will be the active manager, my partner will supply the funds via his self directed solo 401k.
Should I seek out a security attorney? Estimated cost?
Will we need to form a trust which my LLC and his 401k both have equitable interest?
Do we need to open a new bank account for this trust, or will my business checking account work?
I’ve done private lending and understand that dance and I’ve attended a syndication seminar but seems overkill for a SFH- flip.
What’s the cleanest, cheapest and best way to do this?
Basically just splitting profits 50:50
The easiest or simplest way is a commercial mortgage, from the 401k, to you/LLC with the property as security . It can be structured to have a kicker at the end but will definitely need to have an interest rate and note associated with it.
So in essence a promissory note, with a deed of trust (mortgage). Yeah, I thought so. I’ve done these in the past. I guess, the kicker would need to be determined before hand though right?
@Carl Fischer is that "kicker" then considered an equity position? (SEC time). ?
No SEC or state registration should apply especially if the the LLC only has one member.
I decided to do a lender borrower arrangement for this deal.
If we JV up, does that make me the investment sponsor and would that require a separate LLC and separate bank account?
I would not want him to transfer funds from his 401k to me as the investment sponsor when they needed to go directly into the bank account designated for this venture.
Tenants in common would seem to work, not sure how cumbersome that may make things down the road, getting work completed and docs signed.
What would an example of a kicker be?
A percent of profit? a set amount at the end? 2k? 5k?
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