Seeking advice: forming a real-estate purchasing group (x-post RealEstate)
Howdy! I'm interested in forming a real estate buying group with 4 other business partners.

We've purchased properties individually before but this time we're interested in syndicating to purchase together.

We're going to start small with our first property to feel things out and iron out any kinks that come up, but we'd like to do as much in advance as possible so...

I'm seeking advice on a couple of points:

1. Are there any turnkey or well-developed solutions for forming purchasing groups?
2. For a closely held (&lt;15 investors, members are managers) purchasing group which legal structure (LLC, LLP, S-Corp, etc.) makes the most sense?
3. Are there any solid boilerplate operating agreements for this kind of structure that can be used as a starting point for understanding what we should be thinking about and common pitfalls we should avoid?
4. Are there any good resources for understanding the kinds of financing we'll be able to acquire (we're comfortable using personal assets to secure initial financing until the syndicate itself sees FCF/equity)

Any advice, guidance, and reference material is welcome. Thanks in advance!
[{"id": "ceck3wq", "text": "In general, these questions are probably best answered by your lawyer.\n\nI would say for 2, it depends on where you are. Typically an LLC is the way to go because it is tax efficient and limits liability. Certain states have unfriendly LLC laws. In which case, you'll want to use something like an S-Corp or a limited partnership with the investors as LPs and some other corporation as the GP to limit liability. \n \nFor 4, bank financing for acquisitions of assets will be against the property and as such, you probably won't have to put up assets to secure the loan. You probably don't want to put up your own assets as collateral against the loan anyway though you may have to sign recourse carveouts or even personal guarantees. Good corporate structuring, however, will limit the liability you will incur personally to the amount you invested. Depending on the quality of your asset, you could either find financing through conduits or local banks. Those are your best bets for financing.\n\nCurious, what kind of property are you looking to buy and where?", "replies": [], "depth": 1}, {"id": "cecx6um", "text": "What I have seen done by a couple of our customers is to create a parent LLC. This parent LLC will be owned by your friends and yourself. For each individual property, a new LLC \"subsidiary\" is created. Limited partners come in for a minority stake at the subsidiary level. The parent LLC will be a majority owner of the subsidiary. I have seen situations where the limited partners end up putting in all or a majority of the equity needed to make the deal happen.\n\nFinancing available is dependent on the particulars of the property. I am familiar with commercial bank lending and somewhat familiar with hard money lending.\n\nFor bank lending, you will be limited to a max of 80% and the property would need to cash flow to service the debt or should be structured in a way to get there after stabilization {think interest reserve or interest only payments for a limited time}. The personal guarantee of the five partners of the parent will most likely be required.\n\nFor hard money we are looking at around 65% LTV, a higher rate but the lender does not care if the property cash flows.\n\n/ I am not an attorney talk to one for specific advice and to an accountant for tax implications\n\nEdit: I am assuming that you are talking income producing commercial real estate here.", "replies": [], "depth": 1}, {"id": "cedcuyb", "text": "If I were you, I would search for 'competitors' in your area and sit down with them to discuss best practices.  Offer them money for their time.  Without knowing which state you are going to operate from and where, geographically, or what, product specific (retail, office, etc) your target properties are, it will be difficult to provide concrete advice.  For example, if you were in FL (where I am), I ask some questions about your end goals and point you to the right people to speak with.\n\nAll of the above aside, I don't normally recommend partnerships due to long term (multi-generational) conflicts.  I would have a buy out policy in your formation docs to split up assets in the future.  For example, what if one of your partners has a kid you can't get along with or has a nasty divorce and the vindictive, messy divorce has your group in the crosshairs.  Good luck!", "replies": [], "depth": 1}]