All Forum Posts by: Jerel Ehlert

I don't know what state you are doing this in, but there's a good argument that you are offering a security. Granted, you don't say a lot of facts, but from what I gather so far, this could be the case.

Also, if you pool more than 25% of your funds from IRAs, you might become a fiduciary under ERISA.

You should talk to a business and securities attorney in your state that understands REI.

Most tend to go with an LLC, and unless you have something unique to your situation, you can start looking there also. BP has lots of threads talking about entity selection.

From a tax perspective, an LLC can be disregarded. An accountant can say more. Just don't let a CPA form your entity. Even though the Texas Bar exempts them from unauthorized practice of law for that purpose, it rarely works out well.

Most builder contracts are 100% one-sided in its favor.

If you don't understand the asset, it is too risky for you.  Warehouse distribution centers are no longer a metal box to store pallets of "stuff".  They are tech driven automation hubs.

Sounds like your investor is looking to tap your pool for their purposes.

There are lots of ways RE transactions have been capitalized. What you described is fairly common, especially among family. More difficult for SFR because conventional financing wants the human on title. Easier for you and the other to from an entity, and have him sign a resolution stating that though the property is in his name, it is the entities. You can also have the entity take a small 2nd lien against the property so it can't be sold or transferred without getting the entity's permission (clouds title).

Thing is with these deals, they are easy to get into, but hard to get out of.  Resentment may build when all your obligations are over very quickly, but the other must continue to perform (managing the rental), to continue to earn profits.

This can be structured as a loan to be paid off or equity, but equity is more common.

All TREC documents can be used by the general public. They are produced by a committee of Texas licensed attorneys, RE brokers, and non-licensed people.  If licensed under Texas real estate licensing act, you MUST use these when representing others.  Everyone else can if they want to.  Before I became an attorney, TREC is what I used because it covered almost all the bases for most transactions and title companies know what each blank does.

If you understand the TREC contract and comfortable knowing your limits, go for it.  If you get out of your depth, consult a lawyer.

https://statutes.capitol.texas...

Feel free to reach out.  It depends on what you are trying to accomplish, but for asset protection, a trust doesn't do much.

For lending, you are looking for a promissory note and lien (deed of trust or mortgage, depending on your state).

For "partnering", it is a partnership agreement. Partnerships are about the least desired structure. If they are completely passive and no say on major decisions, you might be facing an SEC security.

You really should talk to a lawyer in your state. Lending is probably the safer of the two options. Do all the things you would have to do under a HML and close at a title company.

Although allowed, a CPA is not the one to turn to for entity formation. There are legal aspects beyond the tax that should be considered. Let me know if I can help.