All Forum Posts by: Vidit S.

Thank you. My question regarding insurance was a bit different. Our GC is licensed properly and has his own company which is going to contract with the joint LLC. Just want to know what insurance should the joint LLC get.

Hi all - I hope this doesn’t come across as a low-effort question. I’ve done a decent amount of research this week, but I keep getting conflicting answers from different insurance agents. I’m posting here to gather more data points (even anecdotal ones) to help me get closer to the right answer.

My partner (Joe) and I are doing our first flip in Minnesota on a single-family home. We've brought on a contractor friend (Mike) as a third partner, and we've set up an LLC (XYZ LLC) for the project. Joe and I put up the cash to buy the property (around $300K), and Mike is contributing half the rehab costs while we cover the other half. Mike will also handle the flip from start to finish by coordinating subcontractors through his company, ABC Construction LLC.

The plan is to split profits after the sale, and if this works out, we’re hoping to do more flips together in the future.

Now, here’s where I’m stuck—insurance. After researching online and speaking with a few agents, I’ve narrowed it down to three main types of insurance that might be needed:

1. Dwelling
2. Builder’s Risk
3. Liability

The issue is that I’m getting mixed advice:

• Some agents say we don’t need Builder’s Risk for a flip, while others insist we do.
• Some say XYZ LLC needs its own liability insurance even though Mike's company, ABC Construction LLC, already has liability insurance (and will be contracting with the subs). Others say XYZ LLC doesn't need liability coverage at all. Some said we can be additional insured on the contractor's insurance.

If anyone has experience with a similar setup or insights into what insurance is truly necessary for a situation like this, I’d really appreciate your advice. I need to move relatively quickly, so any recommendations would be super helpful.

Few more pointers that might help:

1. 6 months = Timeline
2. Rehab work scope = changing from 3 bed and 1 bath to 4 2.5 bath
3. ABC will contract directly with subcontractors
4. XYZ LLC might do another 1 or 2 flips and then we will start another LLC. to not have too much equity in 1 llc

Thanks in advance

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Thanks, Brian. Yeah exactly, they will be lending to the asset but since the downpayment is coming from the fund that has many LPs, I was thinking ahead and wondering if I might run into issues. In the past, the lender I worked closely with wanted to know where the downpayment was coming from and then wanted to vet all the LPs, which is counterproductive.

Hence, my question on who are the best lenders who have decent rates and terms and understand the funds. :) 

Thanks for your quick responses.

@Caroline Gerardo Thanks for the answer. The fund is not lending money but investing in multiple single families directly. Would like to pay the downpayment for the properties from the fund and use leverage for the rest. There will be multiples LPs in the fund and I am working with a securities attorney to set it up. 

@Brian Adams, I would like to use leverage to improve the returns so wont be buying all cash. So really only the downpayment of every property will come from the fund 

Hi All - I am looking to set up a small fund of 2M to 3M focusing on buying 1 - 4 units. In my market, the value is about 120k per unit. In your experience, who is the best type of lender who understands the fund model and has effective loan products optimized for funds?

@John D. Are you managing your own properties and started a PM company to do so?

Hi All - Piling on this. If I start a member managed LLC or a manager managed LLC with another partner who does not have an active role or is fully passive and I am the manager or managing member, is that selling security as well?

Just create an interview process.

@David White overleverage is fine if you have the cash reserves to back it up when **** hits the fan. People forget that.