All Forum Posts by: Michael Allen

Hey Matthew,

Thanks for your reply! I've spoken to a residential lender when we first considered using an FHA loan and having one of our partners live in one of the four units.

Like you mentioned, the next step is to speak to a few commercial lenders as well as a real estate attorney after considering what our options are regarding financing.  

In order to outline ownership rights and responsibilities/roles of each partner, using a commercial loan and structuring an LLC with an operating agreement seems to be a viable option if financing is available and the numbers pencil out.

Happy Thanksgiving!

Michael

Thanks Jeffrey! As we have a few other investors who are interested in acquiring properties in the future and leveraging resources, it makes sense to have an LLC and streamlined operating agreement for each project that outlines ownership interest, etc.

Speaking to a real estate attorney and a few commercial lenders is on my action list!

Happy Thanksgiving,

Michael

Thank you Lee for the reply and advice! Based on our situation and goals, financing the property with a commercial loan and establishing an LLC with a well thought out operating agreement seems to make the most sense.

Eric, thank you for providing the SEC link, that information is helpful. A TIC agreement seems to be a logical way of assigning ownership interest as there will most likely be a difference in how much each partner contributes towards the purchase of the property.

Karen and John, thank you for your input, I think it is very clear that consulting with a real estate attorney is the next step in determining how to structure the ownership so that an exit strategy among other things is clearly defined. 

Montrell, you are understanding the situation perfectly. Our goal is to leverage our resources to acquire a 4-unit property while preserving as much cash as possible for renovations or for another investment opportunity. We were considering the FHA route as one of our partners does not own a primary residence and works remotely, so he could occupy one of the units as required. He doesn't need to occupy one of the units, it was just something we considered as an option.

As we haven't considered using a commercial loan to acquire the property, I'll reach out to some commercial lenders for details and terms.  

Basit, thank you for the reply and insight! 

A consultation with a real estate attorney in the area is absolutely the best course of action, I thought I would do a little preliminary research first to try and determine what our options are.

If the loan was in my partner's name, would the bank allow myself and the other partners to be on title as well to protect our financial interest?  

We are located in Portland, OR and most of the four plex units in our area and the surrounding cities within 1-2 hours of Portland are selling for $450-500K or more.  Combined we have about $125,000 in cash available.  This is the first project that I have attempted to undertake with partners so I'm a rookie when it comes to creative financing or acquisition strategies to fund a multi-unit project where the purpose is to hold it long term and we don't have the cash available to purchase the property outright. 

I suppose we could look at a commercial loan, I'm curious if the lender would take into account the existing cash flow from current tenants when determining how much my partner could borrow who is qualified for an FHA loan. My credit is excellent and so is two of our other partners but I don't have any wages for the past two years and our other partners/friends have high debt to income ratios.

I didn't know there were lenders who lend directly to entities so I'll explore this option, thank you for the suggestion and for your reply and insight!

Thank you Jaysen and Alina for the replies and insight, I really appreciate the insight and comments!

My partners and I have $125,000 in cash that we can bring to the table.  We are in Portland, OR.  Most of the multi-unit properties in the area and surrounding cities within 1-2 hours of Portland are selling for no less than $450-500k.  

We thought the FHA route might be an option as a means to secure funding for a portion of the property and use cash for the rest and then have a separate legal/operating agreement between the group members which would outline ownership, responsibilities, etc., but it sounds like a partnership wouldn't be an option. Would it be possible or advisable to instead put all of the partners on title? I'm assuming we can't do that but I thought I would ask!

As I have only used traditional financing and hard money in the past for my own projects, I'm a rookie when it comes to purchasing properties with partners and what kinds of strategies can be employed with partners to acquire properties that as individuals, we wouldn't be able to purchase.  

I'm always amazed when I read about others who, with little money or resources, have built large real estate investment businesses.   And like many who have come before me and are just starting out, I sit back and ask myself, "how did they do it and how can I make it happen?"

Thank you again for the replies and insight.

Cheers!

Four individuals and I are considering pooling our funds to acquire a multi-unit property. I'm trying to determine how to structure the deal to protect each individual owner's interests, minimize liability exposure, and determine what the most logical way to structure the deal would be for tax purposes for each individual investor.

Our long term goal would be to acquire additional multi-unit properties together as our resources grow. We would like to initially purchase a four-plex as our first investment property. We would also like to consider adding individual investors to our pool if the opportunity arises to maximize our leverage. I suppose we're trying to create a "poor man's" real estate syndicate as we each have $25-50k to invest.

One individual in our group is currently approved for a $300,000 loan as a first time home buyer. We are considering using an FHA loan under his name to finance the bulk of the cost and then pay cash for the difference between the sales price and the amount he is approved to finance. He would live in one of the units and we would rent out the other three units. This is just one option we have considered. I am open to other suggestions that would make more sense or perhaps minimize issues moving forward.

I've read about Tenant-In-Common entities and also read comments on BP about setting up a separate LLC naming each investor as a partner and having an operating agreement outline rights, responsibilities, obligations, etc. From what I've read, the property itself can't be owned or placed in an LLC as it would be a residential property with a loan, so establishing an LLC would be to protect and outline the interests of each investor regarding the ownership of the property?

Although I've purchased several investment properties before on my own, I'm a little lost on how to approach this so any and all advice or comments would be greatly appreciated!

Cheers,

Michael

Four individuals and I are considering pooling our funds to acquire a multi-unit property.  I'm trying to determine how to structure the deal to protect each individual owner's interests, minimize liability exposure, and determine what the most logical way to structure the deal would be for tax purposes for each individual investor. 

Our long term goal would be to acquire additional multi-unit properties together as our resources grow.  We would like to initially purchase a four-plex as our first investment property.  We would also like to consider adding individual investors to our pool if the opportunity arises to maximize our leverage.  I suppose we're trying to create a "poor man's" real estate syndicate as we each have $25-50k to invest.

One individual in our group is currently approved for a $300,000 loan as a first time home buyer. We are considering using an FHA loan under his name to finance the bulk of the cost and then pay cash for the difference between the sales price and the amount he is approved to finance. He would live in one of the units and we would rent out the other three units. This is just one option we have considered. I am open to other suggestions that would make more sense or perhaps minimize issues moving forward.

I've read about Tenant-In-Common entities and also read comments on BP about setting up a separate LLC naming each investor as a partner and having an operating agreement outline rights, responsibilities, obligations, etc. From what I've read, the property itself can't be owned or placed in an LLC as it would be a residential property with a loan, so establishing an LLC would be to protect and outline the interests of each investor regarding the ownership of the property?

Although I've purchased several investment properties before on my own, I'm a little lost on how to approach this so any and all advice or comments would be greatly appreciated!

Cheers,

Michael