How to structure this company?

Question

Good morning everyone,

I have been investing in real estate for years but have recently come to the thought that I'd like to set up a company that would act as a small REIT. However, I know there are tremendous legal liabilities when doing something like this.

I'd like to structure the company where I advertise to investors to make a minimum contribution of $10k in return for a 10% annual dividend paid out quarterly over a 2 year term. After the 2 years is up the investors can receive their principal back. Now I understand that I am basically offering asset back securities to these investors. Has anyone ever heard of a small company being set up this way? Can I advertise dividends of 10% to the general public? I'm just looking for preliminary answers to these questions from the forum, I understand before acting on this a consultation with my attorney is in order.

Thanks,

Dan

Tiffany Plovie · Answer

@Dan Smith

As a potential investor, my question would be how are you going to ensure my 10% return? Along with the return of my initial investment?

What you are suggesting sounds similar to some of the real estate crowd-funding sites, albeit with slightly different terms. Have you thought about going that route?

Also, before you invest more of your time and effort into formatting your REIT, I would sit down with an attorney. It is worth the $250+/- consultation fee to see if there are other ways for you to structure your idea while limiting liability, or the best way for you to organize your company, along with forms and contracts to protect yourself.

Knowledge is power!!

Let us know what you decide to do!