My goal is to help California: Homebuyers with their down payments using equity -- not debtHomeowners access their home equity -- without additional debtInvestors: Participate in home appreciation -- real estate investing without tenants or management.It's called equity sharing.

However, they are proposing dissolving that partnership and allowing original investors first opportunity  to participate in providing an additional 22% of our original investment, speculating a hold until 2026 with a 202% return on the new funds, resulting in a "blended return" of about 36% total return of our original+ new invested funds.  

Becoming a Key Principal (KP) in other people’s commercial real estate deals is a great way to shelter your income, participate in several deal at the same time, minimize / spread out risk, capture equity w/ a preferred double-digit return at a discount cash-out-of-pocket investment. 

This revealed the owner names as LSF8 Master Participation Trust.

Me as the Managing Partner shall have full and sole authority and responsibility for managing and operating the business of buying, flipping, and renting of real estate properties.He as the Silent Partner shall not participate in the day-to-day management or decision-making of the business of buying, flipping, and renting of real estate properties.My question is, when establishing my LLC to buy the property do I have to add him as a member of the LLC in the certificate of formation?

Some states have source of income protections that would not allow you to decline an applicant solely based off of their participation in section 8.

When looking at out of state STR Loopholes the IRS is more likely to question how you are materially participating and managing the property.

If you're not participating, as you say, OK, but I will keep looking into it until I'm satisfied that is not taking place.

And it needs to be in your area if you're going for material participation.

Yes its called a participation agreement but they all need to be in alignment and agreement.The other option is to raise is through syndication which gets a lot more expensive setup then each investor would be pari passu but would be easier for investors to agree to these terms than doing a participation agreement.