Form LLC to invest in multifamily as LP

[Ibrahim Ahmed]

Hi everyone, 

I am very new to multifamily syndication. Some of my friends and I want to invest in a multifamily as LPs. We do not want to invest the minimum amount alone and the group we are interested do not allow smaller minimum. They allow investing through LLC, but I think there will be added scrutinies when we want to join in a deal. I would like to know where should I get started. If someone can help or provide some insight, that would be very helpful.

Few questions:

1) As LLC is just used as an entity to invest, are there some SEC rules that we will have to follow?

2) Should we use lawyer, or use something like Tribevest? 

3) What are the potential tax implications? (Understand this is a CPA question, but appreciate any help)

4) Are there any downsides of having an LLC vs. one of us investing in their name?

[Greg Scott]

We accept LLC investments in our syndications. We have seen people do this to overcome the minimums. In fact, I've done it myself. Some of the issues you may face will be dependent on the syndicator and the deal.

I'm guessing your LLC will not qualify for any RegD 506(c) offerings which are for accredited investors only. (Unless all members are accredited) The syndicator may also want to ensure all members of your LLC are sophisticated enough to know what they are getting into.

If you are playing the big game, I wouldn't play with cheap advice. I'd get a lawyer to draft the LLC and talk to a CPA. If you choose to have your LLC be taxed as a partnership, it should be all flow-through so no major implications there.

Investing in your own name is not a problem, but I would NEVER have a group invest in one individual's name.  That will screw up your taxes and whoever has it in their name has control of all the money.