I am starting an investment group and we are considering creating an LLC. However, our focus to getting started will be to help others by being passive investors and possibly funding deals or at least 65% after repaired value of the property.
As passive investors we are considering just asking for double the cash that we put in on certain deals or 15% return on our investment.
What would be the best way to protect ourselves? We will be signing contracts with all investors but for starters we are considering limiting ourselves to MI & GA investors. Are there any sample contracts that anyone can offer or that some passive investors may use or have used in the past?
Please help your advice will be greatly appreciated.
Partnerships, LLC can be tricky. Always ask what if they default or leave the country etc. You would be far more protected with a note and deed of trust or a mortgage in some states. Foreclosure may be hard and timely and expensive but not as bad as trying to get title from a LLC or partnership. Be careful of usury laws also if the return gets over the limit. You may want to do a LLC and loan the funds to the LLC at the 15% rate and then any share of the profit would be profit I believe and not interest. Consult your attorney here for sure.
Sounds like two different groups. You or a group will be helping others start and putting up the money. You or the group can loan the money to the other group which may also include yourself as a member. All I tried to say is it will be better protection to loan the money and get something recored to secure a lien instead of putting the money in as a member of the group. It would be harder to sue the LLC for the return of the money than it would be to foreclose on the property.