Quote from @Account Closed:
Quote from @Gerardo Gallardo:
Quote from @Account Closed:
Quote from @Gerardo Gallardo:
Of course I’m being sarcastic here. I have a question about entities. Before I ask my question, I have to say that I have spent a few days looking through the forum and even though I found really good information I haven’t found an answer that fit my situation.
I'm partnering up 50-50 to do a new construction BRRR with a Home Builder. This person has his own LLC but since he usually build and then sell the houses that works for him. My plan is to create a new LLC where we will be 50-50 partners. Is there a more tax efficient way of getting this done? Are they any implication to refinance the property after built since it will be in 50-50 partnership? I'm currently looking for a CPA to help me set this entity right from the beginning so if you have a recommendation it will be highly appreciated.
Do not do a partnership, especailly at 50/50. That's a long drawn out lawsuit waiting to happen. If you do a partnership, you are taking on the risk of anything he or his family members may do wrong inside and outside of the project. Ask a liability (personal injury) attorney.
Much more effective and a lot safer, you can both have LLCs inside a "Joint Venture Agreement". One of you should have 51% ownership of the Agreement so decisions can be made if the project lags or doesn't turn out the way you think it should.
Thanks Mike! Let me see I understand correctly. What you are recommending is for each of us to have our own LLC inside a 51-49 Joint Venture Agreement? Will the property be owned by one of the LLC or by the Joint Venture?
When I do JV Agreements, one party provides the capital and the other party provides the work and expertise. The simple way to do it is for one to take the property into their LLC and the other have a recorded interest. But technically you each could have your 51/49 shares of ownership on the Warranty Deed. Some of it depends on the long term purpose of the JV. If it is to build & hold, that is very different than build & sell which is very different than buy & STR or LTR or to sell on a Lease/Option getting an option fee.
You have to first decide what your exit strategy is and then you work backwards to know how to set up your entities.
This is great info, I really appreciate you taking the time to answer these questions.
Our goal, is to build and hold for long term rent, cash out refinance and do it again. Do you foresee any issues at the time of the refinance? I will reach out to multiple lenders anyway to see their requirements and their deal breakers.
Thank you Mike!
