All Forum Posts by: Alex M.

This may or may not be the best advice - by it is what I doing to get ramped up right now. Step 1. Create an LLC with her. Structure the operating agreement such that you are the active manager of the LLC. You an then decide the split on the profits. I would suggest starting at 50/50 for all income and 50/50 of all equity after initial investment funds are paid back. Depending on how much money you have available, you could pay 10% of total funds out of your pocket, or more. If you do not have that, maybe you also set up a small loan from her that you pay at x% interest to cover your investment into the LLC. Step 2. Fund a bank account under the Llc's name with her $65k Step 3. Find a deal that you can be all in for under the total funds you have (after rehab costs and all other expenses). Key to this is making sure all numbers work. Step 4. Buy the deal. Step 5. Rehab and rent... You get the picture. Good luck. It's great to find cash parents to help you get going like this. I now have my 2nd and 3rd properties under contract in this manner.

@Peter Mckernan and @Brian Burke

Thanks for the comments. I got all my paperwork in for the LLC yesterday, along with offers on 4 properties with a note that the contract will transition to an LLC prior to closing. From the little I understand from doing some digging, it seems like processing of the LLC should not take too long - and only cost $125 - so it should be ready prior to purchase. I did extend closing times on my offers to make sure I have the time in there for all of this.

One of the offers did not go through - as a full price offer was accepted - and the rest I hope to hear back on by tonight.

Joe Hughes you are the first person I've seen on here using this exact structure for but and hold partnerships. I'm doing the same exact thing right now and in the process of finalizing details. I would be very interested to hear any major lessons learned from your first project.

Steve Vaughan thanks. I agree. Just suffering with a bit of "I want to move quickly" anxiety. I didn't realize the issue with bank account until this afternoon, so already had offers drafted and ready to submit. I am trying to balance the don't rush, with the keep pushing ahead fast enough to fore yourself to learn as you go approach. Getting that balance right can be tough. But while I do agree with the "corporate veil" concerns and value from an LLC, it is not clear to me if that is pierced or becomes an issue if the original funds are written into the operating agreement a the member contribution. Curious if you or anyone has experience with this? Thanks

Question in brief: When buying with an LLC, do you need to have a bank account tied to the LLC, or can a member finance the purchase, while the LLC takes title of the property?

Here's the scenario: So I'm in the process of making offers on what I hope to be my next properties. This time, I am partnered up and trying to buy them under an LLC. The dilemma I face is that my finance partner and I do not yet have the LLC and he is heading out of town for a few weeks, but we have found some properties that meet our criteria for location, price, and estimated rents, etc.

I have the offers drafted up, but when I went to the bank, it turns out I cannot open a bank account for an LLC that is still not fully formed, and even when it is, I will need both partners in person to sign onto the bank account. Is this an issue? Do I have to wait to make offers, or extend the closing to 35 days (so my partner can be there in person) versus the 15 days I would like to use?

Thanks in advance, BP!

Congrats. Sounds like you both are well on your way. I look forward to hearing more of your success stories!

These costs seem astronomically high to me. Reading your post, it looks like you are a very "ethical" person, and that you do not want to just cut the guy loose. However, you do have a choice: 

Why don't you call in 3 or more contractors - find them from folks here on BP - and ask for bids on the scope of work. Based on their prices, you could then turn to your original contractor, let him know what the other prices look like and ask him if he would like a chance to reconsider his costs and put in a more competitive bid. If yes, and the numbers are significantly better, great! go with him. If no, then go with the other contractor that you like best. 

There is something to be said about liking the contractor, and getting high quality work on your own home, but you do not owe this guy anything for his initial plans (unless you have this in writing). I would encourage you to think of this as a business decision. You need to understand the comps (other contractor bids) and decide based on what best meets your needs and budget - not what makes you feel like you did right by a guy who is clearly pricing high based on his knowledge that there is no competition.

@Justin R. and @Daniel H. thanks for asking these questions and your replies. This is helpful information as I am just getting going with this and trying to understand the best way to structure the partnership, as well as to understand the tax implications. 

I've been searching BP for a couple of days now, with little results. Hoping that someone can help me. I'm trying to understand what is the best way to approach a partnership structure for buy and hold properties where one partner is the finance (100% or close to) and one is the locate, manage rehab, manage property, and manage future sale (5 years or more down the road).

I'm the one who is not bringing the finance.

From what I've been able to see, there are a lot of posts on 50/50 partnership splits for profit, etc where one partner funds and other other partner does the legwork if it is a flip, but so far there is very little info out there for this approach with buy and hold.

I've seen some comments stating that it would be surprising to find an investor who wanted to do this as the returns are not that great. However, if you are in a neighborhood that is quickly transitioning and what is a $40k home today is going to likely be worth $100k+ in 5 years, does this change anything?

...but there lies my biggest concern, while I am investing in areas that I believe are going to appreciate dramatically as that is where some real money is to be made, I am buying to cash flow and not guaranteeing to myself or to anyone that the appreciation will really happen. Without this, does it still make sense for my finance partner to work with me?

For those experienced investors who have done this, how have you structured deals for buy and holds and what books, templates, or other resources can you point me to?

@Rohan J. thanks for starting this post. I've been posting and looking on BP for a couple of days now trying to understand exactly this. I am VERY curious how things worked out for you.

I have a similar situation where I have a colleague interested in financing some deals for me. We have discussed 50/50 split of the income after expenses, and 50/50 split of the profit after they are paid back their initial money. 

This partner is willing to fund 100% of the purchase price, and potentially rehab costs to get it rented out, but I am just not clear on how to structure this in a way that works best for both of us. 

If you have any insight since you posted this, I'd really like to hear it, as most of the other 50/50 posts on BP do look like they are focused on flips and not long term buy and hold rentals.