Purchasing property with group of investors

[Account Closed]

Hey Bigger Pockets Crew!

A property in Chicago came across my desk and is primed to be my next target for an investment property. I want to invest in this property with peers to spread the risk/pool our money. I plan to pool our money to be able to put 25% down on the property. % ownership of the property would be divided up by % of the down payment they contributed. We would share managing the property. With that said, what do I need to do to get this started? What are thoughts on this idea?

I assume all investor's names will go on the loan. Do we need to open an LLC? Do we need to open a business account? Any advice would be helpful! Thanks!

[Mauricio Rauld]

I am a syndication attorney so here are my thoughts.  Sounds like you intend to make all your investors managers of this property and contribute money.  If they are truly active and one of you is not taking the management roll and getting compensated for that, you may be OK SO LONG AS, you dont have many partners (i would call them partners not investors).  Once you get to about 5, it will be harder and harder to show that they are all actively pariticaping and inevitably one of you will be doing most of the work and generating the profit which the other one takes more of a passive roll.  This is where you cross the line and get into the world of securities.

You def want an LLC and most likely some sort of a JV Agreement in addition to a well drafted operating agreement.

hope this helps.

Mauricio