Buying a flip with two partners: How do I structure?

Question

Hello all,

I have a unique opportunity in my hometown. Its a great deal, good neighborhood, straightforward cosmetic flip. The property just posted last week and we didn't want it to go so I made an offer in my business LLC (Which already has a hard money buy and hold in it, until I refi out this spring)

Its looking like we are going to get it.

Purchase 110k

Rehab 25k

ARV 185k

Heres my issue with financing:

• One of our partners is bringing cash (His mother at 10%) with rehab costs included 
• Does she just wire the money before closing? 
• Seeing how we all trust each other and its in my LLC, how do I transfer the property after we take ownership of it? I don't mind holding it in LLC but I am just worried come tax season and I want everyone protected.

I have never done private money and this deal popped up and couldn't pass on it. Ideally I would've liked to have done more homework beforehand. Thanks for the input!

Ruth Bayang · Answer

I'm not a lawyer or CPA.I think keeping it in the LLC is easier. I don't know if it's the case in CT but in WA, taxes are triggered with almost every transfer. Add your partners as members of the LLC for the duration of this project. You remain the managing member. It's really important to have an operating agreement regarding this deal. Have a lawyer help you set this up. I know you all trust each other, but have you ever done a deal like this together? People can act in ways you don't expect when large sums of money are involved. No one likes to think about the worst. But it's better to protect everybody's interests up front. Discuss and make agreements NOW while everything is peachy.