Forming LLC / Partnership with Rehabbers

[Lamar Cannon]

Instead of becoming an HML, I'm looking for innovative ways to lend money or finance flips and other real estate projects. After reading a couple posts on the topic, my wheels are turning. Forming a Series LLC or another type of partnership sounds appealing. How would these deals be structured and what's pros/cons does this have over going the hard money route?

Lamar
Austin, Texas

[Keith Barton]

Bill Gulley I was not suggesting your proposed structure was in fact complicated. I was not offering an opinion either way. I just was emphasizing that the simplest method is often the best. There are times when a very complicated solution is actually the simplest way to proceed.

Also - a few states limit the use of Limited Liability Partnerships to professionals such as attorneys, accountants, architects, etc..., but not all. And, an LLP is a very common entity structure for such professionals, in the states that do not restrict use of an LLP, any business can use an LLP.

Terry P. I always look for the source of authority when representing a client. As I'm not getting paid for my comments in this forum, I don't spend as much time worrying about authorative sources when making general comments. However, I will be very specific with my comments/information when making very specific comments about very specific issues.

I'm actually a little surprised to hear a "layperson" expressing concern for authorative sources - thath's great. For those who may not know - the workflow for legal authority goes something like this (only considering state issues - not considering federal issues):
1) Check to see which statutes govern the matter at hand and review (this may involve reading lots of statutes, as they sometimes refer to other statutes for other issues;
2) Sometimes the language in the statute(s) are very clear and sometimes the language is not - if it is not clear:
a) Check to see if the statutes define the specific terms that are in the unclear language;
b) If the language is not made more clear by the definitions, then go to 3;
3) Search for caselaw that discusses the specific statute in question.

However, there isn't always caselaw that discusses the statute in question (either because the statute is new [either newly enacted, or recently amended]). It also may be the situation that different jurisdictions treat the matter differently. At the state court level this usually means one county (or a few counties) interpret the statute in one way and another county (or a collection of a few counties) interprets the statute in another way. Eventually the state supreme court may reconcile any differences in how the statute is interpreted.

If the statute has never been clarified in court (or the specific issue with which you are concerned in that statute has never been clarified in court) then you are flying blind and you hope and pray that a court will agree with your interpretation - IF it ever gets that far....

While I'm on the subject - something that really irritates me is when one of my clients is trying to do something and the other business party with whom my client is working (or trying to work) is leery about something and consults their attorney (that part is great - I encourage everyone to make well informed decisions). The other attorney then tells them (without any thought or time invested into the matter) "No, you can't do that." Then I try to talk to the attorney to find out what their specific concern is and they just get pissed off with me because when I ask for the authorative source they consulted in giving their advice to their client - they can't give it to me because they didn't actually look into the matter. Instead, the attorney just went off "instinct" or what they thought they heard from someone else. All of which is wrong. They get pissed because they get caught in not actually doing their homework, but they can't back down from their initial position because they think it will harm their reputation with their client.... OK, sorry, just had to get that off my chest.