Multi person partnerships

[Philip Eaton]

About six or seven friends and I are all interested in starting to invest in real estate. Our plan is to pool our funds and then probably use financing as well. In the future we would probably want to continue adding funds and growing. We are not decided on a specific asset class, but perhaps a buy and hold duplex, 4 plex or similar depending on price and location. We live in California so we will probably want to purchase out of state. None of us have much real estate experience other than our own homes or homes that later became rentals. I wanted to see if anyone has recommendations on how to structure something like this. We are thinking about an LLC, but it seems this has a lot of overhead costs and will be more difficult to obtain financing. On the other hand we like the legal protections of an LLC, especially with so many of us involved. I really appreciate any advice or insight anyone may have. Thanks!

[Jon Reed]

This just sounds like a bad idea... 7 people with no real experience or knowledge in real estate pooling all their funds to buy a single multi-family property. 

With that many people you will run into some major conflicts between the group which could end up killing the entire plan. 

If you are all about going forward then you all should sit down with a lawyer and get an LLC drafted up that covers how the group will handle the countless issues that are ahead. (yes this will cost a lot of upfront but save you 10x that amount in the future)

My opinion... start off by yourself. Spend a year saving money and learning all you can about Real Estate and then buy your first out of state deal as a single owner LLC. Then if it goes well, have your friends become private money debt investors in your next deal... or just continue on by yourself with the help of a hard money lender.