JV best structure

[Chris Johansen]

I am investing with a builder to build SFH as spec homes and sell them. Traditionally I have sold the builder land and loaned him the money to buy the land and build the house with us splitting up the profits when it sold. He didn't have much downside in terms of potential losses, and I could be somewhat passive and protected legally (he owned the building site etc. and took care of liability). This worked well as we didn't need loans.

Now we are looking at expanding and will need bank financing to do it.  As a bank will be involved I am trying to think of the best way to structure this.  Also, I have never used bank loans for building in the past and want the new setup to be both good from a liability point of view and something a bank will lend to.  I have the credit and will be funding and backing the loan.  But I really like not being an actual builder/developer/selling entity from a liability point of view.  

Should we start a new LLC as co-owners? Can I "cosign" for the loan to convince the bank to loan money to the builder (and if so require some sort of oversight from me for money to be dispersed to him?)? I'm sure I'm not the first person to be in this situation, what have others done that worked? Thanks to everyone who shares their insight and experience, it is appreciated.