Acting on behalf of my investor

[Jeremy Basiger]

I have found a REO property that I am looking at purchasing. I have an investor lined up and we both agree that making an offer is the next move. I have approached a real estate agent to submit our contingent offer on our behalf. I was then told that we needed proof of funds. My investor travels a lot and was able to (on short notice) text me a picture of an overview of his bank account showing that he had more than the necessary funds to purchase the property. My real estate agent says that this isn't enough, that it must be on a bank letterhead and that the offer has to be in the name of the account holder. Is this true? From the blogs and books Iv read it always sounds like the purchaser can be myself. As my investor is a close friend and we have already negotiated terms should there be some type of form between the two of us that would allow me to act on his behalf? Of course when I asked my realtor if she has worked with investors in the past she agreed that she has had man transactions dealing directly with an investor, not with the middleman, in this case me. Any advice would be greatly appreciated as I feel we are not being taken seriously in this endeavor.

[Jacob Pereira]

I'm confused as to why your friend can't just send the statement? If he has access to his account while he's travelling, why doesn't he have access to his statements?

The second part is more complicated. Be very careful with how you structure this purchase, because there are lots of legal and tax ramifications to who owns the property and how the funds are handled. At best, the way you're currently going about this will require you to pay income tax on the money he's sending you (minus about 15k of tax-free gift money), and at worst you're (albeit unknowingly) committing fraud here. I'm a strong believer in bootstrapping and doing as much as you can yourself when you're starting out, but in this instance I'd HIGHLY recommend you get some professional legal and tax advice before proceeding.

I'm not a legal expert, but I can tell you what I would do, which might give you enough information to at least ask the right questions. I would apply for an LLC and if your state allows for expedited processing, pay the extra money for that (in my state, Texas, the whole process will run you a little over $300). As soon as you get the paperwork, apply for an EIN and then open a business account at your preferred bank. Have your investor wire the funds to that account and as long as you're doing cash purchases you can handle it yourself. If the deal falls through you can just wire back the money, but at least you'll have the entity in place for next time. Just make sure that you have a robust operating agreement that dictates what percentage of ownership you each retain, how distributions will be paid out, how members can sell their shares in the company, what happens in case of death or incapacity, etc.

Good luck and happy investing