Rental Property Investor · Missoula, MT · Member since 2017 · 17 posts · 3 votes
My friend and I are planning on partnering on a four plex in the coming weeks. He is a relatively experienced investor, myself new, and his friend who has the LLC more experienced as well. I am looking for suggestions on how this deal should be structured in terms on a partnership, how that works, and if its possible to go through someone else's LLC?
In terms of partnering I'm trying to do my due diligence as I don't fully know the legal process and what that looks like on paper. Should we try and go through someone else's LLC or is that even possible? If so what does that process look like?
It should be a new LLC Partnership between all of you individual partners. If you cannot all afford to do that bit of protection away from HIS other liabilities and properties than I wouldn't do the deal. The real statement is you can't afford not to. It does not cost thousands. Start with a boiler plate agreement customize it together from there. Then you register in the state that the investment is in.
The filing Fee is about $75. The cost to have an attorney draft an agreement may only be a few hundred. Have a meeting and everyone discuss what they want covered.
I would personally form a new LLC for this particular property and either a partnership agreement or operating agreement outlining what is required from each partner.
I would personally form a new LLC for this particular property and either a partnership agreement or operating agreement outlining what is required from each partner.
Thanks Jermey,
I figured thats what would be the common response. Do you know of any pros or cons of going through our other friends LLC rather than creating one for ourselves? We are trying not to create a LLC yet between ourselves in order to keep costs down as well as being able to borrow from more sources.
It should be a new LLC Partnership between all of you individual partners. If you cannot all afford to do that bit of protection away from HIS other liabilities and properties than I wouldn't do the deal. The real statement is you can't afford not to. It does not cost thousands. Start with a boiler plate agreement customize it together from there. Then you register in the state that the investment is in.
The filing Fee is about $75. The cost to have an attorney draft an agreement may only be a few hundred. Have a meeting and everyone discuss what they want covered.
I would personally form a new LLC for this particular property and either a partnership agreement or operating agreement outlining what is required from each partner.
Thanks Jermey,
I figured thats what would be the common response. Do you know of any pros or cons of going through our other friends LLC rather than creating one for ourselves? We are trying not to create a LLC yet between ourselves in order to keep costs down as well as being able to borrow from more sources.
With the other two partners prior experience you will have no problem with financing. The con is that the partner who runs the LLC will be the owner and you won't be. You can file an LLC online yourself for less than $150. The operating agreement can be done together although I don't advise that. You may be great friends however, one may not make a great business partner or money manager. Everyone has their own strengths and weaknesses. My strengths are putting together great deals and keeping contractors on time. However, my weakness is the mundane day to day stuff which is why I choose to let my wife or property management company take care of that. If you need help I can walk you through filing an LLC on your own.
These guys already stated what I would recommend. The main reason you want a new LLC would be because it wouldn't be carrying old liability into this new deal. Even if you have an LLC restructured it can be impacted by the investments that it was used for in the past. And paying an attorney to edit a document will cost nearly the same amount it would to have them write you up a new one.
You can read up a bit on venture specific LLCs in this article, if you are still trying to find more resources on the topic.
I just went through a similar exercise. I was originally just going to have a JV agreement drafted with my partners LLCs. But creating a comprehensive JV agreement requires a lawyer... and its very very expensive!!!! So instead, we decided to just form a new LLC with both of us as partners.. with new LLCs operating agreement laying out the details of the partnership. A Much much easier solution... and much much cheaper too!
@Ethan Ducharme Best thing to do is just consult with a lawyer that specializes in real estate and cpa. They are well versed in the best way to shape this agreements that creates a win-win for both parties and gives you the best protection legally as well.