How to leverage OPM

[Dane Turk]

We have some investors are looking to go in this Multi-family deal with us. 20 units for 2M and each of them would put $50-100k. Has anyone used OPM for down payments (20%) before? How do you guys structure the partnership so everyone gets their fair share? Any advise would help! 

[Taylor L.]

You need to speak with an attorney about this to see if you can do a true General Partnership, or if you need to syndicate. If they're passive investors, you probably need to do the typical syndication steps.

The most common structure is to use an LLC with two types of membership units. Investors buy "A" units, which hold maybe 80% of the equity, but have very limited voting rights. The General Partnership (you) owns "B" shares, which hold the remaining equity and have all the voting and decision rights.

If these are passive investors, just doing a JV agreement doesn't put you in the clear. The SEC has a lot of rules, it would behoove you to research 506(b) syndications a bit more.