All Forum Posts by: Jerel Ehlert

It helps to get the language right.  Let's see if I can restate this:

Up to 5 people will form a Texas LLC. It will be manager-managed, with those responsible for daily operations as "managers" and everyone else as only "members".

Having a % of the owners be guarantors is common and in most cases, expected.  Banks typically want the operators (managers) and enough net worth to cover the loan, which may or may not be the same array of owners (where managers run, but have nominal net worth bringing in members with net worth).

UNDER NORMAL CIRCUMSTANCES, profits are distributed pro rata, meaning if you have 10% of the membership interest, you get 10% of the profits.  

And like others mentioned, this may or may not blunder over the line into an SEC regulated security.  There are other tests, like ability to vote on major dispositions of assets of the company.  Talk to an attorney. 

You can get more offers with owner financing.  You would have to do a wrap because you have underlying loan on it and it would be way simpler if you didn't.

Next problem is who the buyer will be.  Land means non-consumer, but the minute they move onto the land, it becomes a consumer loan.  That could be a mobile home or RV, or even a "tiny home".

Sub-100 units almost isn't worth the effort because the economics doesn't work for syndication or off-site management.  There are plenty of books and podcasts to explain in detail why this is so.

As for drafting a syndication, retainers vary by firm, but I don't even look at a project for less than $15K. Depending on size and complexity, you can expect to drop $25-50K on legal work.

Depending on how you "raise money", you might spill over into a securities regulated product.

Fencing off is the long, slow way to AP.  If you want to speed things along, file an affidavit of adverse possession and pay all the property taxes for 5 years.

Track down one heir, get a contingent contract to purchase (based on other heirs/closing).  Once you have an interest, you can open title and figure out who is an heir.  If it is really that messy, most likely you will have to get a determination of heirship from a probate court.  Maybe get an order of sale with the proceeds going into the registry of the court for any unknown/unknowable heirs.  Not exactly a cheap way, but will probably get the job done.

Trying to rezone in Austin MSA is the epitome of swimming upstream.  Just work with the zoning the city wants.  Will save you time, energy, and effort in getting projects done.  If you work with them, they might even accelerate your plans.  Mixed use is a good route.

Create a special purpose vehicle (entity) to buy the property.  The private lender loans money to the SPV and takes back the shares or certificated membership units as collateral.  If the SPV defaults, she takes over the entity. Not a structure for unsophisticated parties (you or them).

Or...you go with a short-term JV.

I don't know where you, them, or the property are located. Laws are local, so the answer depends on where everyone is. In many places, an LLC works, with the operating agreement spelling out everyone's rights and responsibilities and how profits are split.

But really, you need to contact a lawyer in your state.

I think you may be taking the wrong approach. Set a target cashflow, appreciation, and asset class you are willing to gain expertise with, then look at areas that can give you those returns.  Depending on your mix, some places might not be achievable in any of the markets or might be achievable in any market.