All Forum Posts by: Kyle Smith

Stamped concrete doesn't have grout.  That should be very durable.

The park numbers are lower, but not by much. They just reported June numbers and the drop was less than 4% https://irma.nps.gov/STATS/SSR...
I know park visitors are not the same as people staying overnight in cabins but there is a strong connection between the two. 

No one knows what the real estate market looks like a year from now, two years from now, or even ten years from now.  That's the stuff of casinos.  And I am really not worried about it, as I am holding long term.  My point was that, for every year you wait on prices to go down, you've given up income.  You can make a really poor buying decision and still come out way ahead:

In 2005, I gave $240K for a cabin in Cosby and my neighbors thought I had lost my mind.  Then the financial crisis hit, and the cabin value dropped to $150K-ish.  But I didn't sell so it didn't matter to me.  Over 15 years, it's produced over $600,000 in rental revenue, and is now worth at least $750,000.  And while I was negative cash flow in the early years, that's sofa change compared to the gains.

Find a real estate investment that you believe in for the long term, buy, and hold. 

In most states, an LLC is a sensible structure for an operating company. The 1065 K-1 (Part II) identifies the Profit/Loss/Capital percentages owned by the partners, and you can adjust these items to tailor the P/L/C to the particular operation. Someone with tax experience can chime in, but the LLC can (based on the LLC Operating Agreement) dole out profits and losses however the members agree. In my experience we have also had LLCs as partners/owners, which allows (in NC at least*) an easy way to add or remove people's investment dollars into/out of the operation.

Here is a real-life example of a project I put together. I'll call the Operating company LLC-O. LLC-O is owned by two 50% capital owners, LLC-A and LLC-B. LLC-A has three members now, two when it organized in 2017. LLC-B has three members now, four when it started... and only one founding member from LLC-B is still a member. The membership transactions in LLC-A are completely independent of the membership transactions of LLC-B, and further the changes have absolutely no bearing on the Operating company (LLC-O) or its taxes.

*NC General Statutes 57D-5-01: Article 5, Transfer of Ownership Interests; An ownership interest is personal property. 

This is certainly possible. There are some good cautions on this thread, and you should definitely consider it like a marriage - and get a prenup - if you do this. I believe your question was specifically about planning for exit. 

One simple way to plan for a potential long-term breakup is the "shotgun clause".

A shotgun clause will essentially allow either partner to exit at any time. And the mechanism is a buyout. 

For example, if your partner wants out, they can offer to buy you out at a $500,000 valuation. 

If you felt that the $500,000 valuation was fair, you could sell your interest, and that's it. 

If you thought that $500,000 valuation was too low, you could buy them out at that price point, and that's it. 

This is a simple but potentially effective way to allow either party to exit at either time, and be prepared with a fair, firm offer. 

Of course, if you aren't in a practical position to buy out the partner, or can't find another partner, then their superior financial strength is an advantage. But, then again, in an arrangement like this, they are taking WAY more financial risk and real risk than you, and only getting 50% of the profits. 

I hope this was helpful!

@Kyle Smith this should probably be structured as a partnership LLC that owns the property with a detailed operating agreement spelling out all of these terms. Then there wouldn't be questions surrounding what he may or may not want to do with the property in the future - the LLC would own the property, not him.

Operating agreement could show 50/50 ownership of the LLC but with all capital and future appreciation belonging to your partner, all management/care/maintenance handled by you, net profit split 50/50, and decision to sell in the future must be agreed upon by both partners.