Surprised by success- now need advice
Background: Two co-workers and I were purchased a house and rented it out. We didn’t know how the investment would do, but it is turning out great. We currently have an offer in a duplex and if we get it will start to receive some serious cash flow every month. The 3 of us are extremely tight so we really did nothing to formalize the first house, we just did it. Now we would like to formalize.
Our plan:
1) create an LLC and put all mortgages and deeds into it
2) put our name on all the deeds
3) work with a lawyer to make some type of business agreement
4) try to make it scalable to where we could raise capital if needed
What are we missing? Does anyone have a recommendation? What does everyone think of legal zoom for doing this stuff?
The first part of this will be determined by the lender - are you taking out an investment loan or something else and will the lender allow an LLC to either hold title to the property or be used as a pass-through. If it's a requirement that all of you go on title you may want to hold it as tenants in common with an agreement that allows one or more of the co-owners the ability to buy/sell with right of first refusal or otherwise dissolve the deal. This part is important because it will be almost impossible to find a buyer for the 1/3 ownership interest if one of you want out. A well thought out entity might protect against some liability and allow pass-through of revenue and expenses. In any case spend a few dollars in advance for legal and tax advice, as I'm not providing either :-)
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