All Forum Posts by: Maximilian Glodde

Good Morning All,

Need some advice please.

A good friend and I are buying a rental property at $165K and structuring it as follows:

- Formed an LLC in the state - both are 50% owners

- I am contributing the down payment $16K

- He is contributing set up costs (furnishings, etc.) - $7K

- My name is on the loan

- The LLC holds the property

To get us back to a 50/50 equity split in the property, I would like to reimburse 100% of the monthly profits to myself from the LLC until ($16k/2) ($7K/2) = $4.5K is reached. Given the points above, this would mean we both have invested about the same $ amount in the property. Does this make sense?

If the $16K is contributed by myself to the LLC to buy the property, can I pull out up to $16K effectively tax free since it's paying back my initial investment? Almost like I lent $16K to the LLC for the purchase and it's paying me back?!

Thanks for your advice in advance!

@Ryan Blake, thanks so much for your advice! This has actually helped me greatly when deciding our split. We ended up agreeing on 75-35. :)

Now we're waiting on the terms from the hard money lender and our first flip will be well underway! 

Hello Fellow Members,

I am very new to real estate investing and currently have 2 units, which I acquired myself and manage since they’re nearby. I am now considering investing with a good friend of mine and would like some advice regarding what an appropriate percentage equity split would be based on the following.

Context:

1. My friend is a real estate agent, has reliable (and demonstrated) connections for contractors, property managers, and contacts for hard money lenders.

2. I work a full time W2 job and have the means to purchase (with financing) the property in question.

3. We want to build a long term business relationship and ultimately start our own LLC that does real estate investing.

The “deal”:

- Purchase an off market property at ~$280K and invest ~$70K with ARV of ~$500K.

- Rehab and sell within 90 days of purchase.

- Comps in the area support the ARV.

Considerations so far:

1. He gets buyer agent commission on $280K - 2% = $5.6K

2. He gets seller agent commission on $500K - 2% = $10K

*I figure 1 and 2 would happen anyway - i.e. if it wasn’t for him I and the seller would be spending that money so might as well be him. Then again without me, deal wouldn’t necessarily happen for him.

3. I am taking all financial risk - mortgage, hard money lender, personal cash. Also carrying associated costs during rehab.

Questions I have:

1. What would be a reasonable amount of profit share for him? Aside from the money he will make from agents commissions,  I thought 5-10% - this would net him $5-$15K depending on how well it goes.

2. Obviously we have a lot of trust in each other,  but I need a lawyer or will a simple 1-page signed document with the terms above suffice (obviously somewhat more refined).

3. I assume that he would have to disclose that he has some kind of personal stake in the property when the property is listed for sale after renovation?!

Thanks so much in advance for your advice!

Max

I should add that this is in Boston.

Hi All,

Going to look at a condo today that has the following properties:

- 2 floors zoned as 1 unit

- Floor 1: 2 bed, 1 kitchen, 2 bath

- Floor 2: 3 bed, 1 kitchen, 1 bath

- Both floors already have separate heating/cooling zones and meters

This is listed as a single unit probably because there aren't enough egress points at this stage. There is another unit in the building. We would likely have to add additional egress point for the upper unit via a deck and some stairs. 

Since I'm pretty new to this, I have a few questions I hope you can help me answer:

1. Where can I check if I am even allowed to split the unit officially?

2. Is there anything the other (existing) owner in the unit below can say/do to prevent such a split?

3. What other high level things should I consider?

I've attached floor plan images to help.

Middle floor:

Top Floor:

Thanks so much.

Max

Thanks for the responses!

@Charlie MacPherson I was very surprised to see something that cheap myself. The property looks pretty run down in the photos (I'll PM you the address). 

@Steve Bracero it would be funded with all cash and then take out a construction loan to renovate and refinance.

@Ann Bellamy thank you for the helpful info. The property is actually south of Boston but what you're explaining is probably applicable in this situation although it says that no one is living there at the moment. Main thing is to figure out whether it's a short sale or not at this point.

Hi Everyone,

first post on the forum and pretty new to BP.

Background: My wife and I are in our late 20s, living in Boston, and are sitting on equity in our apartment. Both of us have well paying jobs, no kids, and an awesome Frenchie (not relevant). 

Our goal: Financially independent by 35 - not millions but enough to not work for someone else.

Advice needed: BiggerPockets has got us so excited about real estate and now we're trying to channel that into some action. Is there any good reason not to buy a foreclosure (aside from the mountain of paperwork)? I'm looking at a property near Boston for $70k, decent school district, 5 minute walk from the train station (15 mins to the city), and median selling price in the area is well above current asking price (~$400K). It will obviously need at least $150k worth of work. They also want all cash or construction loan financed. Any thoughts are appreciated.

Ps: we are also considering buying multis (up to 4 units to take advantage of an FHA loan).