I have an investor who may be willing to provide 100% of the capital for a flip project, to purchase it and for construction. He will not be involved in the project directly.
Someone else would also be doing the bidding. In this type of case, who usually goes on the title? Is there some type of contract out there I could be suggested to look up, for the capital to act as a loan but not require rates obviously, as he's providing the capital for a percentage of the profits in return. I heard something about using liens?
What is the best way to set this up, to make the investor feel secure.
If someone else is doing the bidding, how would the investor get to be on the title, he would have to show up at escrow Im assuming?
BP Legend @Will Barnard has a ton of experience with this I believe. Will, can you weigh in on it?
In most instances when you have a partnership like this you will want to have an operating agreement that clearly outlines the responsibilities of both parties. I think you would also have specific paperwork detailing each individual property. (assuming you don't stop at just one flip)
sometimes when the investor is funding 100% of my flips, I let him be in the title. Of course we have a separate contract explaining the details of the deal.
General business information is needed.
You and the money guy go on title and contract with GC for the work to be done, you need a partnership agreement.
Does the money guy want to be active or passive in this deal?
If you intend to do more, you and the money guy can form an LLC, the LLC would be in title. You would have an Operating Agreement with an LLC.
You can go on title and borrow the money, but his cut needs to be described and may likely be predatory on his side, that doesn't bother you as a borrower and if all goes well, but people do die, things happen and he may not be dealing with you, then he could have issues. These types of arrangements are done, they can be simple, but there are pitfalls that usually aren't understood even by more astute borrower/lenders.
You can use any entity and partner through that entity, various Trusts, corporations, your tax positions matter.
I suggest you begin studying general business entities, joint venture partnerships, general and limited, LLCs, etc. as each carries different liability assumptions, accounting and responsibilities of the parties. You can't "partner" properly without understanding these aspects in business and this type of information is not real estate.
Just asking who goes on title won't cut it really, the best thing for you and your money guy is for both of you to see an attorney to properly structure this and your RE deal. Yes, they will charge you, but how it is done can be duplicated 100 times or more, so the cost ends up being pretty cheap over your business life. Good luck :)
It depends on if the money person in this transaction is a partner or a lender. If a lender, then you go on title and lender gets a trust deed and note securing the investment. If a partnership, then there are a ton of ways to structure it. You both can go on title as tenants in common, one entity with both of you holding ownership and that entity holds title, etc.
Need more details to better answer your question. Both active? Only one party us active and the other passive? Dies the other party want to be on title as owner or just as a lender?
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing