RE Partnership Structure

[Joel O.]

This is for those Real Estate attorneys or people who have experience with my question:

My mother-in-law wants to partner with me on my next deal and wants to be a silent money partner in this deal.

She has no plans on touching or looking at the property, she only wants to receive regular distributions in her account for her investment.

She also does not want to appear on any loan, mortgage, or LLCs. 

She wants to be completely invisible essentially.

I've already spoken to a RE attorney and he says this is over his head and doesnt understand the situation, i currently have scheduled meetings with other attorneys, but would love to hear from the infinite wisdom of my fellow BPers.

How would I structure a LLC and distribute either monthly or quarterly to my mother-in-law?

My original idea was to simply create a partnershup LLC with her as my partner.

If i missed anything out let me know so I can provide that info.

[Mitch Messer]

Hi @Joel O. It sounds like your MIL just wants to be a private lender and earn a specific return on her invested funds in your deals.

This is a pretty common and easy-to-structure arrangement. If this concept is "over the head" of your current RE attorney, you need yourself a new attorney, and fast!

She doesn't need to be involved in your LLC at all; no more than Well Fargo would be if they were your lender. 

She's going to be your bank. You'll use her funds to acquire (and perhaps rehab) investment properties that you will either buy-and-hold or fix-and-flip, or some other investing strategy. Either way, you'll give her a 1st mortgage on the investment property as security and then sign a promissory note to pay her on an agreed payment schedule.

There are tons of specifics you'll both need to negotiate here, like appraisals, maximum loan-to-value, note terms, etc. That's where a great attorney will be invaluable!

(And, there's also the valid concern of whether you really want to be in business with family. But that's a whole other discussion...)

But, what she's asking for here is not complicated nor difficult to set up.

(And, no, I'm not an attorney nor am I give you legal advice!)