Real Estate Investment Company Structure

Member since 2021 · 3 posts · 0 votes

I am looking to start a LLC for real estate investing and want to allow for investors to help me. I have a LLC for another company so I understand the ins and out of LLC, but not with investors. I own 100% of my other company. I want to create a LLC and ask others to help invest in properties and pay them a return, but not give them ownership of the property or the company. So they would get a set return, and I would own the asset and the company. So is this a common way to do this, and what is the typical return offered to investors? Also, if I needed to give ownership of property or company, how does this work?

0 Reply

59 views

Most Popular Reply

Brock Mogensen

Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes

Sounds like you are looking for debt investors. Generally around 10% is the rate of return for a debt investor. You definitely need to talk to an attorney familiar with structuring these deals. There is much more to it than an LLC. You will need about 100 pages of legal documents as what you are talking about is a syndication structure..most likely.

2 Reply

See this reply in the discussion

8 Replies

Jump to latestLatest

Sort by

Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
@Jon Silver
You will need to do this through the sec or do an sec exemption such as a reg d 506b or 506c
This would require a private placement memorandum and filing form d with the sec.
You will need an sec attorney who can also assist on setting this up. Also make sure you have a good cpa who understands funds and k-1’s
7e investments53 Reviews
Website View Page
0 Reply
Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
3y
Will this be for fix and flips or buy and hold rental units?
If you want to retain 100% ownership of the company and the property, then the property must be purchased and held in the company name with you as sole owner. The investors would be "lenders" and their security would be a deed of trust, promissory note, and perhaps personal guarantee plus named insured on the hazard insurance policy. You would not need any SEC filings for this unless you were publicly advertising the investment. WIth private lenders, you need to find the lenders who have the capital necessary and have the proper documents for the loan/deed of trust. The deed of trust would need to be filed with the county recorder's office and all of the docs and the funding of the loan should go through escrow with title insurance for the lender.
Podcast Guest on Show #130
1 Reply
Hunter Reed
New to Real Estate · Texas Christian University · Member since 2022 · 119 posts · 56 votes
3y
Jon, whats wrong with bringing on general partners at 25% stake? If you and your partners purchase a 100 unit commercial property would allow you to own 25 units. This strategy would allow you to scale and take down big projects without having the worries of paying back other investors. As you reach your ballon and decide to sell or cash out refi you are getting a much higher return on your investment. If you decide to hold on to the property and cash out refi overtime you can buy the other partners out. Just a thought. Good luck on your syndication.
0 Reply
Scott Mac
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
3y
Talk to a real estate attorney about what you want to do and get ready to write a check for the service.
This person might also know others who may want "a piece of the action" in your deal.
0 Reply
Jon Silver
OP
Member since 2021 · 3 posts · 0 votes
3y
Thank you for the info. Not opposed to sharing ownership, its just the people I am talking to that would invest dont want ownership as they do not want to do any of the work day to day. It would be a buy and hold company. I also may offer them ownership and charge the LLC a management fee for the work so they could not have to worry about that. Definitely open to different options. Thanks again.
0 Reply
Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
3y
Quote from @Jon Silver:

I recommend you read some books on raising private capital before you spend any time, effort, or money on setting up a company. Have a solid plan, then set up the company and go live.
The DIY Landlord Book4.7247 Reviews
Website View Page
1 Reply
Brock Mogensen
Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
3y
Sounds like you are looking for debt investors. Generally around 10% is the rate of return for a debt investor. You definitely need to talk to an attorney familiar with structuring these deals. There is much more to it than an LLC. You will need about 100 pages of legal documents as what you are talking about is a syndication structure..most likely.
2 Reply
Evan Polaski
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
3y
@Jon Silver, as noted, your original comments lead toward having private lenders. The second post "not wanted to do the day to day work" leans towards a syndication.

I cannot speak to any logisitics in bringing in private lenders to fund your "company", but if they are funding properties, you would likely just structure it like any other mortgage with promissory note.

On the syndication side, they are owners in the property, as limited partners typically. You do all the work, they share in the profits. As Nathan mentioned, sounds like you are very early in your education on this front, so I would spend more time trying to understand the pros and cons of various types of funding structures before jumping into anything.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.