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Real Estate Fund Formation

1,479 Views | 9 Replies | Last: 6 yr ago by dcAg
DTAg09
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AG
I'm wrapping up my second flip in a year while working my full time job.. the wife stays home now so this started as a hobby to back-fill her income but I'm hooked and would love to make it my full time job in the next 12-24 months.

My question is this.. I have a list of 8-10 friends/family/current co-workers very eager to invest in some of my future projects. What would be my best method of formation?

I'd ideally like to pull together $300-$400K in order to do 2 flips at once and in a 12 month span distribute out net proceeds to investors.

Any advice or experience on what's worked in the past would be greatly appreciated.
gig em 02
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Hire a good securities lawyer. You are stepping into very complex legal territory and failure to take the appropriate steps can get you in some really hot water.
CS78
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Partner with one person per deal. In, out, repeat if it goes well. You really probably don't need that many people. Find the few that have the funds, are easy to work with, and run with it. If one person doesn't bring you enough capital then make the third partner your local banker.
Copp
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Much better to have one investor and one deed of trust. Avoid a fund if possible. Investor is secured by a deed of trust on the property. Typically interest only loans if the goal is to be in and out within 12 months. Much cleaner for all parties involved.

We use private money for real estate projects all the time. One investor per one property is really the way to go
JamesBREI06
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AG
I have some thoughts on this and have done similar things to various degrees if you'd like to chat
Whoop!
DTAg09
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AG
Thanks for the feedback everyone!
Greeze06
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AG
I'd like to be someone's friend in some 're deals.
Copp
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Debt friend or equity friend?
texrover91
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AG
Copp, what kind of loan fees do you see on a 12 month I/O note, and what's a typical rate?

Private money, or bank, or ??

progress
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AG
texrover91 said:

Copp, what kind of loan fees do you see on a 12 month I/O note, and what's a typical rate?

Private money, or bank, or ??


PING on this
dcAg
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I would put together an operating agreement for each party that states what the nature of the relationship is and who has what rights and how their "split" of the transaction is allocated. I would also have a development agreement which sets expectations of what you are going to do for each of the deals.

The next project should be a Delaware LLC. Put each project in its own special purpose entity.
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