i appreciate and thank you ahead of time for any given info. so i basically already have the members to start the group and we already set the monthly contributions and our goal but im not sure how to go about making the group “legit”.
thanks again
consult an attorney. It’s your safest bet.
GooD LucK! :beer
anyone that has prior experience?
Well, I do agree that you need to consult with an attorney, but first you need to decide exactly what it means to you to be “legit.”
What is your (or your members) goals with the group? Is it educational, informational, informal gatherings, what?
Will the group be actively pursuing deals as a group, or not?
Are you intending on collecting monthly/annual dues? If so, is that just to cover the costs of a meeting room/food/etc or to make $$$ for the group?
Is the REIA going to be a for-profit, not-for-profit, or nonprofit?
Who is going to run the group? Are you going to hire a manager, or have members run it? If members, how are they going to be appointed?
Raj
You are right. I’m sorry. I shouldn’t offer advice on things that I apparently don’t have ‘prior experience’ with. Because it’s just preposterous to think that I might have once tried doing the same thing and learned that the best way of going about it is to have an attorney set it up.
Or perhaps more simplistic verballistic math is needed:
With Attorney = higher probability of success
Without Attorney = high probability of failure
Formula used for above figures = experience
GooD LucK! :beer
You can get a startup package from the National REI association. Just do an internet search for their site and ask for their package.
http://www.nationalreia.com/ClubPortal/ClubStatic.cfm?clubID=795&pubmenuoptID=7482
This is the link for National REIA.
Scroll down on the page that comes up from the link above, and on the bottom right, click on the link for starting your own REI club.
my bad forclosure, i didnt mean to insult ur knowledge about this subject, i was just lookin for more detail in the answer beside just talking to a attorney, but thanks for the advice, ill definately look into that and the rest of your guys help. i appreciate it.
so roger, basically the members of the group r friends amongst each other. our goal is to make monthly contributions until we reach enough money to invest in our for piece of real estate. the group will be run among the members, so no manager, and we are in this for a profit.
Monthly contributions to save up for a real estate investment? Who wil hold the money? What is the collateral/security for each member’s monthly contribution? What if a member wants to deduct the monthly contributions? Who’s going to do the accounting? What if a few months down the line, one of the members can no longer commit to an investment and want’s all their dues back?
I say, forget the monthly member contributions. Just have each investor decide how much they want to invest. Then note the total amount available for the group. Find the investment property that fits the numbers and get the investment. The group can hold title as tennants in common (TIC) or the group can incorporate into an LLC and the LLC can hold title.
The other consideration is financing. If you plan to get a mortgage, then someone or everyone must qualify for a loan. If the group defaults, the could potentially be one or some on the hook with their personal credit. If no one wants to personally guarantee the morgage, then you’ll have to incorporate and the corporation will have to qualify for the mortgage on its own without individual personal guarantees. This means at least 30% down on the target property and a formalized joint venture (preferrably an incorprated entity).
Finally, whether or not you formallly incorporate the investment group, you HAVE to put your joint venture in writing and keep careful financial records, and that will require someone qualified to manage it. Having “no manager” spells trouble.
Unless you’re going to buy reits or another passive group investment operated by others, you have to understand that buying real estate is different from buying stocks. You’re buying a business and it must be run as such. One key will be a very tight agreement between the partners. Some will want to work, some will want to watch, some will just talk, and some will get burned out. Your agreement should be prepared by a skilled and experienced real estate lawyer and lay out all aspects of responsibility including the key players.
You’ll need an “Il Duce” who can run the business with dictatorial control, some checks and balances, and the help of others that he/she can direct. Whether it be managing the property directly, or managing a manager, this person hopefully has some real estate experience.
This is not a quaint game run by the Beardstown Ladies.
Good advice all. One point worth repeating.
There MUST be someone in control. There MUST be someone in control.
Don’t know the numbers involved, but if it’s more than two, there had better be an absolute decision maker. The more people involved, the more important it is to have a leader.
Raj
Here are my thoughts based on the other ideas above:
-
LLC is probably easiest and best, ask an attorney [the poster’s obligatory CYA]
-
National REIA’s Strategic Planning course is excellent–I used it to start ours in Utah County
-
Who’s in control–I would be hesitant to do it unless I could be a complete dictator about what the money is used for, etc. I thought about doing something like that, but I think I’d rather just wait until there’s a property to buy and then put investors together. Who needs the risk and hassle of managing the fund in the meantime?