REIT or Investment Group Question - Posted by Dave Roekle

Real Estate Investing Real Estate Law
1

Posted by Dave Roekle on October 10, 2005 at 15:51:04:

Thanks for your comments. I spoke to an attorney last week and he was suggesting that I set up an LLC and that I a be “non-member manager” and then have 4 or 5 investors be the “members” based on the percentage of money they invest with a cap of some type. Then I would have a “Management Agreement” with the LLC and would contiue to buy and sell properties with some type of defined parameters under which I could buy and sell without their specific permission on each deal. The LLC would then do the “funding” on each transaction and take a 50% ownership position in the properties and my corporation would have the other 50% ownership. Each time property is secured, the Corporation would issue a note back to the LLC for security. On a quarterly or annual basis, the profits would be calculated and 50% would go to the LLC and be divided up amongst the members based on each members percentage of “ownership” of the LLC. The other 50% would go to my corporation. As a non-member manager, the members would have the right to remove me as the manager if they felt I wasn’t performing to their expectations (which would be well defined) and thereby giving them complete control over the LLC.

I think this would work well for what I am doing.

Thanks for your input.

Dave

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REIT or Investment Group Question - Posted by Dave Roekle

Posted by Dave Roekle on September 23, 2005 at 13:14:03:

I have been actively buying and selling properties for the past couple of years here in California full time under the following scenario:

  1. I do all the market research
  2. I find and negotiate all the properties
  3. I open and follow each escrow
  4. I close each escrow
  5. I then put the property back on the market
  6. I find a buyer for the property
  7. I open and follow the sale escrow
  8. I close the sale escrow and deal with any problems.

I do all the work; the investor puts up 100% of the money.

Once the property has been bought and successfully closed, we deduct all the costs of the transaction and the net profits are split 50/50

I would like to set up a small investment group or REIT (whichever is simpler) where investor can put their money into the “group or REIT” and be guaranteed a certain return on their investment, but without actually going on “title” or having a lot of control or input into the deals.

I am in California and so far all the properties we have done have been in California.

I want to keep this as simple and uncomplicated as possible, while at the same time offering the investor a high degree of protection on their investments.

Please let me know your thoughts and where you might direct me for some legal and financial help.

Please feel free to call me if needed.

Thanks,

Dave Roekle
800-993-7886
951-278-2370
951-278-2886 Fax

dave@fscigroup.com

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Re: REIT or Investment Group Question - Posted by John K Haslach, CPA, MST

Posted by John K Haslach, CPA, MST on October 10, 2005 at 14:51:06:

REITS are not simple. I believe the SEC may have filing requirements if your partnership/LLC has over 100 partners/members.

Even with a partnership/LLC, you will need a partnership/operating agreement. These are not simple. With outside investors, you will need an attorney to set on up who is very comfortable with p/o agreements and the tax law.
John K Haslach, CPA, MST