I am getting ready to discuss a JV with someone. I am doing my first multi fam; he has many units. My original thought was to just work with him as a private money lender, where he brings the 20% down to the table, two years or less, interest only to allow a bank refi after a year. But I know there is a lot to learn. Is JVing the way to go? Then does he still bring the funds and we split the whole thing since I am bringing the deal to the table? How does this get set up and what would/could it look like? An LLC?
@Monica Litster a consideration is what will the primary lender allow. If you own it and your money partner puts up the 20% down. The bank might say no. They don't want a 100% financed deal. A way around that is to form an LLC with your money partner as a member but his or her membership entitles him to a fixed return on his or her investment. In other words their membership in the LLC gives them the same result as a loan.
Or if he or she joins the LLC you can split the profits any other way you both agree to.
Thank you gentlemen. My thinking is to learn from this what I can, so to partner with him. So do we set up the LLC before initiating the LOI? That way it is the LOI initiating it?
Is there somewhere to learn how to set up a partnership LLC? What I am asking is, does the LLC outline this guy bringing the 20% down to the table, and then all income and expenses are split? And I know it doesn't have to be 50/50, but how do I know what it should be? I get that everything is negotiable, but I don't know what I don't know at this point.
Hey @Monica Litster ,
I am in the process of closing on a property with a financial Joint Venture partner. I brought him the deal, will handle the property management, accounting, manage the reno's, etc. He is financing the mortgage, providing the 20% down payment, and the $120k renovation budget. We are planning to re-finance after 6 months, and hopefully be able to pull all of the original investment. We are splitting the cashflow 50/50, and after his initial investment is paid back the equity split will be 60/40, 60% to the financial partner. This is the first JV for both of us, that is why the split is 60/40. I wanted to get one under my belt and will hopefully get 50/50 on the next one. We have a legal JV agreement, but have not started an LLC. It's a little different in Canada, but we may look into rolling this property and the next one into a LLC. I hope it goes well!
Many thanks! (My hometown is Hamilton!)