First Property Bringing Investors On Board

[Account Closed]

Hey Bigger Pockets Crew!

A property in Chicago came across my desk and is primed to be my next target for an investment property. I want to invest in this property with peers to spread the risk/pool our money. I plan to pool our money to be able to put 25% down on the property. % ownership of the property would be divided up by % of the down payment they contributed. We would share managing the property. With that said, what do I need to do to get this started? What are thoughts on this idea?

I assume all investor's names will go on the loan. Do we need to open an LLC? Do we need to open a business account? Any advice would be helpful! Thanks!

[Eric M.]

Well, more info is needed. First of all, you absolutely need a business entity. Whether an LLC is best would be a question for a lawyer. Depends on how many investors and what kind of liability everyone is accepting. With a business and a business entity you absolutely need a business account.

This is not a DIY project. You need a lawyer and an accountant. You say "peers" but does that mean your friends? Or are you raising money from strangers (the public)? Even if it is friends, there may be securities law issues, which get quite complicated. But again, I don't know how many investors or really what you are trying to do.

I think in no way do you want each investor on a loan. Why would you want every investor to personally guarantee the loan? Do they all want to be personally responsible for a loan as a limited partner? I don't know what kind of loan you are talking about but LLC's cannot generally get real estate loans.

These questions just indicate a WHOLE LOT you don't know about the basics. You really need professional advice. There are many places you can go wrong on this.

Good luck.