Investor · Charlotte, NC · Member since 2008 · 217 posts · 12 votes
What would you recommend for someone who wants to start something similar to a REIT, but on a much smaller scale?
Let's say you have 10 friends who want to provide capital that you intend to pool together to invest in real estate Your goal would then be to provide them a fixed or variable rate of return. As the entity grows, your intent is to market that investment as a product to where investors could receive fixed and secured returns.
What type of entity would be best to handle a plan like this?
I guess our thought is that investors may be more comfortable providing capital that will be secured. A straight loan to an LLC is pretty simple, and could leave an investor at risk if we were to go under.
You can also do it as an LLC with the investors buying units.
Normally in a winding down, lenders come ahead of shareholders/members in the distribution of any remaining funds. So, the investors have more risk by buying shares/units than lending, not less.
No, this hasn't gone anywhere yet. My friend wants to put this project together, but he's been busy with other real estate ventures. I don't have the know how to do it on my own, so I'll have to wait until he's ready.
I'm looking for a good book about starting and funding a REIT. I am in discovery phase right now, but plan on starting a large investment group in late 2009.
Daniel, if you have your investors lined up then the rest is easy if you have a good securities lawyer to help you out. In an ideal world, you would want all your investors to be accredited and sophisticated and that should allow you to get the securities stuff done for less than $15K.
One possible structure for this would be an LLLP or, depending on your state, an LLC.