All Forum Posts by: Forrest H.

I'm looking for experience shares for anyone who has quit claim deeded a property to an LLC after a conventional mortgage has closed. How soon after the mortgage closed? Did you transfer ownership to the LLC? Did you run into issues with your lender?

I'm reviewing the contract to purchase a property.  The agent is representing both the buyer and seller in the transaction.  I'm seeing that she is charging a "transaction fee" of $295 to both the seller and the buyer (me).  Is this normal to charge this to both parties?  I guess I would've expected something like this to be paid by the seller.

Quote from @Benjamin Aaker:

You should form an LLC and have the attorney draft the operating agreement. This LLC is what takes title, not you as investors.

My lender is telling me that it will cause a higher interest rate and larger money down to do it directly.  I was thinking of taking title initially and then transferring it into the LLC later (by waiting for the 12 months for a Fannie Mae loan).  Do you think it's worth it to take the higher interest and larger down and just go LLC from day 1?

Also, excellent suggestion on the shotgun clause!  In fact, I think this solves many issues by itself.

Quote from @Curt Riffel:

Why would you both be on the deed? Couldn't you have the name on the deed of the property be the Partnership/LLC name?

I intend to put the property in an LLC, but from what my lender is telling me if I get the financing directly with the LLC it's going to be more down and a higher rate. He said I could just transfer it into the LLC a year later with a Fannie Mae loan. My guess is that they wanted to be on the deed to help protect themself in the deal. Although it seems weird that they are on the deed but not on the financing?

Hello, I'm considering going into a real estate partnership with someone I've known for a while now.  We're looking at purchasing homes in college towns, doing some renovations and adding rooms, and renting out rooms individually. They have done this same model onto properties already and I had expressed interest in being involved in the next one.

Here's how they proposed it would be set up:

1) They find the deal

2) I get the financing and put down 2/3, they put down 1/3

3) We are both on the deed

4) They manage the property, get tenants in , deal with tenant issues, etc...

5) We both have 50% equity

My goal is to not be involved with the day-to-day management, but rather oversee the financial side of things.  I have more capital than time.

My partner has less capital and is willing to do more of the day-to-day for higher equity.

What I'm looking for a specifically is feedback on the structure of the partnership and ways to make sure the incentives are aligned.  For example, it seems common to have a preferred return for money invested that incentivizes the performance of the manager.  But, I would also be worried about a scenario where the property isn't doing well and my partner doesn't manage the property well.  Since they already have 50% equity and are on the deed, it seems like this is a big risk?

Please give me your feedback on this structure and if you can think of ways the structure might be adjusted to better align incentives and protect both parties. (And yes, obviously we will see a lawyer to put together all of the legal agreements and everything, but we are just talking about the high level structure at this point)

Thank you!