Hypothetical questions:

Let's say you have 10 people interested in rental property investment. Each have some experience in the market, but no more than 1 or 2 properties a piece. The person's are not related and in fact not everyone knows every one else. Not one person in the group has a strong relationship with anyone. Each person has $100,000 they would like to invest in the group. The primary goal would be to buy cash flow positive rental properties using financing and leverage the group buying power when it came to management, transaction fees and maintenance. The properties would be owned by the group, company or organization. Returns would be reinvested into additional properties for a term of 15 years. After 15 years, returns would be paid to the group in some form.

What business structure would you recommend?

What specific terms would you suggest in the agreement among parties? (I know you aren't lawyer or at least aren't acting as one on TexAgs)

Other than an accountant, lawyer, and real estate agent, are there other knowledge workers you would employ?

What are the biggest hurdles and pitfalls do you see?

The biggest hurdle is going to be when someone wants out. I wouldn't recommend that you pool the assets. If you want to jointly negotiate for management and other costs that can still be done as a pool.

I wont even pool resources with my only brother because I don't 100% trust his wife with a portion of my retirement, which any investment would impact. Unless you can say that you 100% trust every partner, their spouse, or their future spouse who they may not even know yet, I would be out. I love the idea on paper but the human element kills it.

The term you are looking at is real estate syndication. You need to talk to an attorney experienced with those, who will draft the operating agreement and let you know if a private placement memorandum is needed. The operating agreement will help protect you from the risk of an investor needing the money because of divorce. Usually those funds have 5 year horizons. With $1,000,000 on hand you can leverage into NNN properties or apartments but those are making less sense now.

The idea would be that one or two people would do all the work and the rest would be more passive investors.

Could you not handle exit, death and spousal provisions through a contractual clause or business structure?

Thanks the term "real estate syndication" led me to a wealth of information.

I would be looking commercial investment with that kind of investment. An LLC would probabaly be sufficient as far as formation is concerned but probably worth asking whatever attorney you hire.

I am in a similar situation currently and would be happy to discuss with you how we structure things. Let me know if you want to jump on a call sometime to compare notes. david@voorheesteam.com

I'm glad that helped. Is your group full of accredited investors? Feel free to email me at info@maroonspiderllc.com, we're looking at some commercial properties.

What type of commercial properties?

Let me know if I can be of help. Working on a NNN deal for about $3.8mil and just had a great one at $8.4mil come across the desk. Some nice cap rates over 7-8%.

I would suggest creating a single-purpose entity, probably an LP assuming you're investing in Texas, for each individual property. Invest the money in the LP, and have the LLC be the GP for each LP. Keep all the money and returns in the LP where the liability is minimized, and control the property through the GP. You're essentially syndicating each deal, and liability of each deal does not extend beyond itself to the other investments. The most important part will be working out the partnership agreement in the LLC.

I'll reaffirm that 15 years is much too long. 5 year horizon is more of a market time period.

All that said, the best advice I can give is find a good RE attorney!!

Would lean more towards Multiple LLCs (multiple company structure - which costs more) or the Texas Series LLC (which achieves asset protection and $ savings at same time).