All Forum Posts by: Joshua Sokolow

Thanks for the advice everyone. My partners and I have a better idea of how to move forward.

Basit, it's going to be a 50/50 profit split.

I really appreciate all of your time in replying to my post! - Josh

Thank you to both Bob and David for your replies. It's really helpful to see several perspectives here.

Yes, across 3 properties, we've been doing our own accounting/taxes, but each property we add and certainly as more investors come on, the more complex and complicated it's become.

Hi Wayne, thanks for the clarification on that part. 

Regarding the GC, I think on paper it's going to look like it's all us because we're going to have a separate contract or side deal with him. When the property is purchased and sold, it'll be done so by our LLC.

In our case, non of us are taking the profit as income but rather rolling it into the next deal so do you know how better that would work?

I have an LLC that will be doing an all cash purchase of a 3 br 1 bath SFH. We are going to be fronting the cost to acquire the property but the GC that I have used for several years is going to cover the cost for rehab. Then we're going to split the profits on the sale of this flip 50/50 (Purchase in Nov 2020 and List in March or April 2021).

I've never done a flip, which is why doing this deal makes a bit more sense because he has experience flipping and I'm investing out of state (technically, I'm out of the country right now).

My main obstacle at the moment is how to factor in capital gains taxes. There are 4 investors in this LLC and the property is being purchased by the LLC so I'm assuming that we'll have 100% of the tax burden and the GC won't have any. Is that correct? How would you all structure the dividing of profits after sale without knowing what the capital gains implications are?

Last thing, we're small and just getting started. We've decided it's time for a tax specialist and lawyer to join the team. How do you all factor those team members in from an expense point of view? What's a good price? Any recommendations?

Thanks,

Josh
 

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Bristol.

Purchase price: $82,000
Cash invested: $26,200
Sale price: $89,900

I just recently, in the midst of the coronavirus crisis, closed on a property in my hometown of Bristol, TN. I'm currently an out of state investor there and I bought the property from my PM as she had this property as a pocket listing for another client of hers. With the numbers making sense and the easy of transfer because of her being the PM for both of us, this deal made a lot of sense.

What made you interested in investing in this type of deal?

It was at a good price. I have a team in place to make the deal quick and safe.

How did you find this deal and how did you negotiate it?

My PM had the deal as a pocket listing and I negotiated the price based on work that needed to be done on the place and running the numbers on the BP calculator.

How did you finance this deal?

Traditional mortgage company that I have a previous relationship with.

How did you add value to the deal?

Renovations.

What was the outcome?

Still waiting, but smooth so far.

Lessons learned? Challenges?

Having a team in place makes things much easier. If you shortened the length of time between deals, it makes the process easier and more comfortable. Repetition is great.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, Mia Johnson has been a great PM for all my properties.

I just paid my contractor for materials. In general for smaller jobs, we do 50% up front and bigger jobs set up a draw schedule, but I know the guy so I understand your concern.

Thanks for sharing this. It's very inspirational! 

Thank you, Dan.

Hi BiggerPockets community,

My friend and I are going to close on our first property (4-plex) together and we're wanting to transfer the ownership into an LLC. In the future, we'll have another investor come in on this property as well. I've read a bit about notes being due by banks because of breaking the due-on-sale clause. Is this one of those cases? Do we need to go ahead and get a real estate attorney?

Any direction and guidance on this issue would be really helpful.