All Forum Posts by: Chris Johansen

Thanks to all who are replying.  We are doing 300+ homes so individual LLCs isn't realistic in this scenario.  I will check on the insurance although my builder is insured.  My thought was that since I was simply loaning him money and wasn't otherwise involved that that offered a level of protection as well.  

Any ideas on forming a new LLC with him to build vs continuing to loan him funds and dealing with the bank perhaps not liking this?

Thanks for the replies so far.  

1. For liability I'm thinking if someone gets hurt on the job site, we find out the home building materials were toxic, something along those lines.  As far as financial liability for the loan I'm good with that. Perhaps these liability issues aren't something most people building think about and if so I'd be interested in hearing that.  I am pretty averse to that type of liability due to having significant assets and a strong W2. 

2. Cash for liquidity is no problem.  I've got that covered.  

3. Experience - We've been building for 10+ years in this market and have successfully built and sold 200+ SFHs

4.  Banks - I have some that I've spoken with informally and they are interested.  I will ask them specifically how they would like it structured but I'm sure they'll ask for what is best for them.  I'd like to present an idea that is palatable to them but best for me and my builder.  

Basically I'm wondering if we should start our own LLC (owning it ourselves, "hiring" out the construction to his other LLC to avoid layering), or can I have his company get the loan and I just sign something showing that I'm providing the cash, am on the hook for the loan, etc? It seems like that paperwork could get complicated. Any other ideas for the best corporate structure for this planned endeavor? Again, thanks to everyone who helps!

I am investing with a builder to build SFH as spec homes and sell them. Traditionally I have sold the builder land and loaned him the money to buy the land and build the house with us splitting up the profits when it sold. He didn't have much downside in terms of potential losses, and I could be somewhat passive and protected legally (he owned the building site etc. and took care of liability). This worked well as we didn't need loans.

Now we are looking at expanding and will need bank financing to do it.  As a bank will be involved I am trying to think of the best way to structure this.  Also, I have never used bank loans for building in the past and want the new setup to be both good from a liability point of view and something a bank will lend to.  I have the credit and will be funding and backing the loan.  But I really like not being an actual builder/developer/selling entity from a liability point of view.  

Should we start a new LLC as co-owners? Can I "cosign" for the loan to convince the bank to loan money to the builder (and if so require some sort of oversight from me for money to be dispersed to him?)? I'm sure I'm not the first person to be in this situation, what have others done that worked? Thanks to everyone who shares their insight and experience, it is appreciated.