LLC Logistics in holding title for a flip

[Michael G.]

Hello BP!

I had a proposal from a local flipper who was looking for a partner to do this Fix-n-Flip:

• House at auction: $250K.
• Needs $60K-$70K in rehab, then a market value of $400K.
• I buy the house at auction for cash and fund about half the rehab.  They fund the other half and do all the work.
• We split the profits at sale.

There were a few things that caused some concern, but the biggest one was that they proposed holding title to the property "in their LLC". I was not comfortable with this, mostly because I don't know much about LLC's, and since I would be buying the house and have the lions share of financial stake in this deal. I can understand each of us wanting to protect our stake in things, but I don't really understand holding title to something that I'm buying in an LLC that they control?

Any insight here? 

[Mike S.]

Yes, but you will need to be given enough membership interest in the LLC and I would make sure that the operating agreement are protecting my investment (no clause to quick me out of the membership, first distributions to reimburse my investment, before sharing the next distributions with all members, ...).

In fact I wouldn't invest without an LLC...