Newbie from Baton Rouge, LA

[Brad McDonald]

Hi, everyone.

I recently read one of Brandon Turner's books which led me to this site. I live in Prairieville, LA, outside of Baton Rouge, and I'm just getting started learning about real estate investing.

I've been in IT for 15 years but have always held an active interest in real estate. My wife is a Real Estate Agent and we've closed on 10 properties over the years and remodeled a couple of homes while occupying. We've never bought a property purely as an investment property, though.

I'm mainly interested in rehabbing because I enjoy the design and build process and would like to pick up a property sometime this year. I still have a lot to learn but I'm looking forward to the journey! I have heard about The RING in Baton Rouge and I plan on attending soon.

First question: I have stumbled upon an acquaintance who may be interested in becoming a passive investor (funding only). I know there are a lot of variables, but in your personal experience, would you rather build a partnership with a funding source or use them strictly as a private lender? What are some of the variables to consider?

Thanks, in advance, and I look forward to interacting with all of you!

Brad

[Robert Leonard]

Hello and welcome to BP Brad McDonald ! Having your acquaintance (X) act as a Private Lender/investor is far simpler of an arrangement than as an equity partner. As a partnership, you'll need a well thought out and thorough operating agreement just to open bank accounts. You'll need separate accounting & accounts for anything that you do without X. You'll also have a slew of other tax implications to consider.

If X simply acts as the bank, you won't even need an operating agreement for 98% of what you do. Accounting and taxation matters are clear and simple. Or should I say simpler? I'm brushing over this for some general perspective, but your legal and tax advisors can really explain the differences in detail. Equity partners are much more complicated in a lot of ways.

I look forward to meeting you at a RING meeting or around town!