All Forum Posts by: Austin Fruechting

Find the seller's phone or email if you at all can. Talk directly to them. Ask why they are selling, what their goals are, if they're interested in selling their others etc. 

Then see if theres a way to work a package deal for more if your goals align... such as if they're looking to cash out and retire. I did exactly this and turned one 5-unit property that was on the market into purchasing 80 units off market. Package discount and the seller not having to pay 6% realtor fees meant a great deal. 

When I just had my first few I just listed my LLC and said "Owner"

Now have no day job and am a one man operation (if you can even call it an operation), but I have a lot of LLC's so I just say "Real Estate Investor"

 And the only reason I didn’t set up different ones there is my brother wanted to invest, was a missionary in Ethiopia, has 5 kids, so he didn’t have enough money to do the deal by himself, so my dad put in the other cash... so hopefully my pastor/missionary brother doesn’t come after me for securities fraud! Lol

Thank you for that answer! It's great to know that it crosses from joint venture to syndication at that low of a threshold of more than just one investor. I do have a partnership that crosses this, but that is with my dad and brother, so hopefully they don't come after me! My others are just with one other person per investment/LLC.

The first one cost me about $5k. The ones after $1-2k because we can use the first one as the starting point

@Brian Burke - appreciate the detailed response, thanks for taking the time to write that. I agree in the assumption that if you have 30 investors, and even if they have some “voting rights”, that is still going to be viewed as a syndication and I would never recommend that. 

The question is when does it cross from a legit joint venture to syndication? Because I’m assuming two people can partner together where one person puts up cash and the other finds/runs the deal, but is that incorrect? Is that a syndication too? Are all joint ventures where one person is the cash and other runs the deal or flip actually syndications? If not, what and where is the line between the two? Is it dollars or # of people?

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Edit to add on the point of the roof; set your dollar amount for major decision list above any issue like a roof or HVAC, or you have clauses about things like that can be done at the discretion of the manager, or........ but this part isn’t really the issue of discussion, just wanted to point out there are many ways to handle those things. But if you have 30 investors you’ll probably be viewed as a syndication anyways!

For sure I appreciate your position and understand and correct, they are not SEC specific attorneys. And I appreciate the response to help me and others reading. That is what’s awesome about this place and I would be a fool to think you’re trying to give me a hard time by providing sound caution!

I would absolutely agree that if you push this idea too far (such as networking for fundraising, making the members incredibly limited with no real power, etc) it would definitely be looked at as a syndication. But I do believe if you are structuring things with family and friends where you're just the manager of the LLC, what I am talking about is more akin to a joint venture. Are you not allowed to have a joint venture where one person provides the cash and the other finds/runs the deal? That's more the effective structure I am talking about and if that's not allowed a LOT of people here are in trouble because that's a very common structure everyone touts. Perhaps it's the number of parties involved? The most I have in any one is 2 partners that provided the cash, but maybe if you used 10 peoples cash that don't know each other and/or are doing things listed above is when it crosses the line?

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I want to add to all my comments here; I am not an attorney, and not giving legal advice. Everyone should seek their own advance. 

For what it’s worth, I use two lawyers, both partners at a major firm, both specialists in their field (one business contracts/agreements and one real estate). I feel they are overly safe in all the deals we’ve done, which can be sometimes frustrating because they are very pricey for me. All my deals, both real estate and just business, are one or two zeros short of the size of deals they usually deal in, but I want the best and not have to worry about anything. 

So I don’t think there’s any issue or they wouldn’t of let me do it. Syndication the cash people are fully limited partners with no real rights and no say in anything. Just having a designated day to day operations manager of a partnership is very different. 

Setting it up as an LLC is fine with all people being members. Then you're the manager of the LLC with a list of responsibilities for the regular operations. Then there's a "major decision list" that requires votes. That list includes things like selling, refinancing, taking additional loans, spending over a certain dollar amount, replacing you as the manager, etc. Structured that way it is not syndication because they do have input into the running of the property, albeit just the major things.

Mutual Savings in Leavenworth KS is who I have used. It's just outside of KC and they'll lend in KC. They're portfolio lenders and service all investment loans in house so they aren't as strict with those details, but it may different for a new customer.