Is creating an LLC conglomerate a bad idea? (Crowd funding)

[Matt Hintzke]

Excuse my potential bad use of terminology here as I am very new to REI and am trying to get creative on my financing strategies.

Basically, I have been looking into REI around the Seattle area (I live in Redmond, Wa) and want to get into the market while its still on the rise and while I am young (I'm 25). The issues I have come across are:

1) Finding a MFH in an area I can live (close to mine and gf's work) in order to qualify for an FHA loan has been pretty rough. There just aren't a ton of MFH on the market for a reasonable price

2) Investing out of this market (say, Spokane, where its cheaper) is hard as well because I have to purchase and manage a property that is hours away by car, and this being my first investment, I'm not sure how well it would work to be so far away.

So I'm sort of generalizing my concerns, so maybe someone has suggestions on how I can achieve #1 given my sitation.

This leads me to this idea. Create an LLC or some kind of legal entity where I can pool together funds from friends and family to make investment purchases. Esentially it would be a small scale REIT, so instead of having to put down $50k on a loan myself, I get 10 friends/peers to put down $5k each and make the same purchase.

Obviously there are legal ramifications for doing such a thing such as properly dispersing profits, etc, but is this something people do? Can it be done? Is it legal? Are there any major issues with trying to crowd fund the investment in such a way?

Any suggestions are welcome! Thanks

[David Clinton III]

@Matt Hintzke, If it's tough to find deals on the market, I would recommend aiming for deals that aren't on the market.  There are dozens of "mom & pop" MFH owners out there that are aging and tired of owning their properties and have considered selling in the back of their mind.  I would find a local title company, get yourself a list of criteria, and ask them to give you a list of property owners.  Start sending out hand-written yellow letters to drum up interest.  You may send out hundreds of letters, and get dozens of phone calls and a few interested sellers and maybe one deal.  But to get started, all you need is one...