How should I structure this real estate fund and what Docs are needed?

[Austin James]

Hello! A partner and I who buy multifamily properties together, have a few investors who want in on what we’re doing. I want to pay them a preferred rate of return on their money without giving up equity in the deal. 

How do I go about setting this up? What documents do I need drafted, & is there a website that will work for this purpose so that I don’t need an attorney to draft these? It will be a simple structure and our investors are friends. What are some examples of how this should be structured? What kind of return should we even offer?

thanks in advance, BP!

[Joshua Christensen]

Hey Austin,

It's best to have an Attorney draft this as you're getting into offering securities to your investor friends.  If they're not actively involved, It needs to be done correctly.

I had a friend a few years ago do this through mortgage notes.  Everything was ok for a few years.  Something happened that interupted payments and the investor (aka note holder) sued for payment.  It turned into an SEC case against my friend because offering notes is considered a securitization act.  

Be careful out there.  The SEC is out looking for these and the fines are not pretty.