Ready to go (possible deal); A little guidance please.

[Tyson Dierschke]

Hey everyone, I haven’t really been active in a while since I sold my rental property last year. However, my wife and I have since found new motivation and come into a little money and now we want to capitalize and make things happen. This will be a somewhat long post, so please bear with me. I have been on BP and learning about real estate investing for quite some time now and finally feel that she is coming aboard. I believe we are ready to make some serious efforts to realize our path to financial freedom. So now here we sit with a small, but useable amount of capital and the will to invest, but a little lost. There is a deal available to us as we speak which I will get into shortly, but I feel it is unusual in the REI sense a would like to see if I can get some guidance on it. Where I am seeking help and/or advice here is in determining what to do first. As of now, we have around $40,000 available to invest in a deal or deals. Possibly more if absolutely necessary. We definitely would like to eventually get back into rentals, both long and short (vacation) term, SFRs and/or small MF. But, I hesitate to use up what we have now on acquiring rentals and not have any left to acquire more or do the occasional flip for capital. So what we were thinking is to reverse that and try to get in on a couple of flip deals first to build up some more operating capital and then start buying rentals with the occasional flip along the way. Although I would love to try house hacking, it’s just not doable for us at this time. We are also very interested in commercial investments and possibly boat and rv storage down the road, but the focus now is just getting going. With that being said, I’m not sure we have the ability right now to take complete charge over an entire rehab project. With full-time jobs and three little ones in school and involved in extra-curricular activities, adding any more stress to our current schedule would spell disaster. We are really interested at this point in going into a deal or two as a money only partner and banking or reinvesting our returns. We are also not opposed to taking part in a syndicated deal as long as the returns are good. So now for a few questions: 1. If you were in our place, what would you do? 2. How do I go about finding investors / rehabbers who may be looking to work with someone like us? 3. Should we start an LLC and a business bank account for our real estate investment transactions? 4. Should rental properties be bought under an LLC. Thanks for your time! See the next post regarding the deal mentioned above...

[Costin I.]

Hi @Tyson Dierschke! I kinda agree with @Kevin Sobilo, at least in regard to the multitude of questions you are raising - some of them worth of their own separate discussion thread (which you can search for and you'll find plenty of various advice).

But here is my 2¢:

2. How do I go about finding investors / rehabbers who may be looking to work with someone like us? Look for local meetups (meetup.com) - I'm sure Houston has plenty of them and that's an excellent place to start your networking. You should also be able to connect here with plenty of people in your area.

3. Should we start an LLC and a business bank account for our real estate investment transactions? Depends. What kind of transactions, what volume, in what terms. If it's just you, no partners, buying rentals with residential loans and little equity, probably you should concentrate on growing that first and getting some equity before you worry about LLCs, business accounts and asset protection. If you are doing one or two flips a year, maybe not - although for asset protection reasons it would be better to make them in LLCs (plus there are other tax considerations). If you do a lot of flipping, definitely LLC (see if Series-LLC is an option for you). If you do partnering, you do want to be covered with your LLC, separate from your partner.

4. Should rental properties be bought under an LLC? Depends. Here is a diagram to help you on this question.

1. What type of agreement should we use for this deal? First, never do business with friends. But if you decide to proceed, make sure you are clear on partnership terms. Read here: How to Effectively Conduct Joint Venture Agreements as a Real Estate Investor and here: Taking-on-partner-s-and-limiting-our-liabilites

2. How should it be structured once we decide on the split? See above. Plus, you should have your LLC partnering with your partner LLC, for asset protection reasons (like, what happens if he runs over someone with his car?).

3. Should I start and operate under an LLC and business account for this deal? See previous answers.

4. What are the tax implications for a deal like this? That's a loaded question. Wholesaling and flipping are active income taxed at higher rate. Rental income is passive income, plus you have all kind of deductions and paper depreciation.

5. Any other advice you may have would be greatly appreciated? "Ignorance is bliss. Knowledge is power, but also a burden. The cure to both - the 4 ions: education, action, progress(ion), not perfection".