All Forum Posts by: Anthony Chara

Just let your attorney know what you want to accomplish and they'll make sure it goes into the correct section of the PPM & OA.

Yes, their ownership would be adjusted/compressed based on their original ownership stake and the exact formula would be shown in the OA. I agree with @Paul Haviland's calculation above.

To answer the latter part of your question, Daniel, it's all set up in advance in the Operation Agreement. However, if you have a 'liquidation event' as you put it, doesn't that mean that you've sold the property entirely? In which case, the investors would receive a payout of 80% of the equity according to your example.

If you plan on paying them back their equity stake at a refi, then again, how their equity stake drops will be outlined in your OA. I would suggest that you get them their preferred return for the 5 years you're showing above, plus, an extra bonus at the time of refi. That 'bonus' is up to you to determine, but that will make the reduction in equity easier to palate. Perhaps, since they currently own an 80% stake, you give them 80% of the cash out money once all expenses have been paid pertaining to the refi?

Hi Daniel, you can set up your partnership anyway you choose.  The question is, "do the investors agree with the way you have the deal structured"? If the answer is 'yes', they invest with you and give you money. If the answer is 'no', then they don't like something about the deal and they don't give you money.  Perhaps they don't like the property, the city, the classification of the building, the size of the property, the deal structure or even you.  (BTW, anytime someone tells you NO, always ask them why.) Sometimes, they're just lookie-loos asking about your deal so they can get ideas for their own deals.

As for your deal itself, you can certainly set it up in advance that their equity stake drops after you pay them back. Since their risk has now been eliminated, their reward could also be adjusted. You could even structure the deal that upon refi and payback that they are out of the deal completely if you wanted too.

Good luck to you Daniel!

If you don't go already, you should join a local Real Estate Investing Club in your area. If you're close to Minneapolis, I suggest you check out MnREIA. Ask the people there for referrals to attorneys that can assist you with these transactions or members that do these types of transactions. Also, you can reach out to my syndication attorney, Jillian Sidoti, too. 

35-40 Year AM. No Balloon. Up to 85% LTV. 4.6% INT including .5%-.6% for MIP.

Technically, Omar, you're not even supposed to tell people the amount you're looking to get them to invest (i.e. $30,000). That's based on the SEC's rules, not even Bigger Pockets. If you don't have a good SEC attorney I'd like to recommend you reach out to Jillian Sidoti.

First thing Jacob, NEVER tell a broker on your first call or two that you're looking for Seller Financing. What the broker hears is, "Hi, I have no money. Do you know any Sellers that will give me their property?" Also, if they can't figure out how their commission will get paid, they will generally not be open to discussing Seller Financing on your behalf with the Seller. Yes, these deals can get done in every market, but they generally work better in non-hot markets and on smaller properties. They also work better after you've created a rapport with the Seller directly.

Hi John, I'm actually in St. Thomas today looking at some properties. I don't know if this person will be able to help, but she's showing us some condos today and may have a lead or 2 for you. 

Patrice Johnson
patricekj at gmail dot com

You don't have to wait any time to Quit Claim the property into your LLC. However, the best thing is to just buy it directly into the LLC in the first place. If you buy a 5+ unit property, this is the norm. If you are only looking for 2-4 units, see if you can find a lender that will allow you to buy it directly into your LLC. There aren't that many out there that will let you do that, but they do exist.