All Forum Posts by: Thomas Combs

@Ilan M Aliphas Thanks for the advise, I am actually already planning my strategy for my first property. I just posted this out of curiosity to see how people were formatting their RE businesses legally.

How are you limiting liability for your long term real estate business? Is it different for 2 properties versus 10+ properties?

I have not invested in real estate yet, I am just curious to hear some success stories or best practices to optimize tax returns & liability limitation from structuring your LLC's.

With appreciation, that payout looks a lot scarier for One @David Gotsill but he is committed to making this property a long term rental. His negative outlook on the situation is more accurately depicted as him playing the devil's advocate to make sure our agreement is strong since it is essentially the "if anything goes wrong" agreement. Glad that you mentioned that though, just another thing to think about before putting any ink to paper.

We are planning on living in the house for 365+ days before renting it out in order to only have to pay 3-8% down payment.

What if we added an option for One to sell his equity without us having to sell the property? I am curious if replacing him with a new partner, Four, who is willing to buy him out could be a safer financial strategy for Two & Three. Are you even able to enforce that in a contract (One selling his equity to Four instead of forcing the partnership to liquidate the property)?

@David Gotsill Talk about a wet blanket! Just kidding, your reply was very helpful.

We are partnering more for the experience to learn together rather than the payout. The 3 of us are college friends with unique strengths to bring to the table but we do plan to split all financing equally. We are using financing & have already talked to lenders that have made it clear that we can all be on the same loan (bonus: we all have great credit scores).

We plan on forming an LLC to hold this property. ROFO is a great idea & we think it would be easiest to value One's share at 1/3rd of the FMV. In the last hour, we discussed Three giving One & Two 30 days to accept the offer & start making moves to procure financing to afford Three's share. It seems like if One & Two don't accept the offer, the property is sold & the proceeding would be split evenly instead of One & Two having to deal with a new partner, Four.

We would have to learn more about a Lender's permission to alter control. Building certain protections is a good idea so One doesn't fire sale the property so thank you for bring the legal terminology to light.

We aim to all contribute to a bank account (that would also hold our emergency funds) after making a consensus on any expenses and before paying for those expenses through that account. We think it's possible to rely on unanimous consent and/or compromises OR just not to commit to projects we can't agree on. There will be a set amount defined for emergencies determined in the agreement.

Thoughts now that I have answered more questions? All constructive criticism is welcomed.

@Christopher Smith I said hard time for dramatic effect. It is more so a healthy discussion but I do appreciate the feedback! We are more interested in the ability to call business meetings & come to a consensus rather than giving one person the final say. If anything did go really wrong (outside the boundaries of our eventual legal agreement), we would just approach an arbitrator.

Hey BP,

I am a new investor entering into a 3-person partnership & we are currently developing an exit strategy before approaching an attorney. We are having a hard time deciding how to approach dissolution as one of the partners wants the ability to liquidate the property at any time if he decides he needs to for any reason (emergency or not).

We also want to work in a statute that gives the other 2 of us the ability to buy a partner out before they liquidate the property.

I am curious to hear any dissolution strategies you have outlined before buying real estate with a partner & members' thoughts on freedom to liquidate. For more context, we are looking to live in a single family property for 365+ days then keep it as a rental.