I have a quick question I wanted to throw out today. Purchasing a commercial property with multiple owners and I’m looking for a solid strategy as I know this is done all the time.
- What type of corporation should we purchase it under?
- What critical issues should we be aware of? (not regarding the property itself but moreso, the relationship between the owners).
Thanks so much.
One of the easiest ways to buy a property with multiple investors is just to form a LLC. Each of you would be members. I’m assuming you have acquaintences who will be the members. You must be VERY CAREFUL about advertising for investors and then pooling the investors together, as this can violate SEC rules. If you have a question about this, I would strongly suggest contacting a good attorney.
What critical issues should we be aware of? (not regarding the property itself but moreso, the relationship between the owners).
Many partnerships, especially those involving friends or family, end very badly and I would NOT be involved in such a partnership.
Many partnerships, especially those involving friends or family, end very badly
Perfectly said. A large number of partnerships fail and business ones are not immune to it. I have people ask me a lot if I would partner up for a deal and no matter how good it looks my response is always, “I don’t do parterships, I have one partner, his name is Uncle Sam.”
You could use your acquaintances as investors and you could be the owner/decision maker. I could imagine it being hard trying to share all the information and decision making with more than 1 other person.
Does everyone own an equal percentage of the property?
One way to do it is to hold title as Tenants in Common, but form an LLC to “manage” the property. Management could include assignment of duties for filing taxes, inspections or actual management of the property and its income.