Posted by Clint Coons on October 25, 2003 at 10:46:29:
Fred,
My firm is actively engaged with real estate investors all over the country. We specialize in creating real estate strucutres that reduce tax and laibility for the investors. Your situaiton is not unusual amongst many of my clients who wish to pool money to buy real estate. The problem is that lenders will not extend credit to a LLC or Limited Partnership (by the way, the tax implicaiton of these entities should be considered prior to formation). Thus, one partner must agree to become personally liable on the loan and title will be taken in their name. After title is secured I reccomend the property be transferred into a land trust and the beneficial interest assigned to the LLC or LP. Each of the other partners will agree to be joint and serverablly liable for the outstanding debt. We typically have the other investors sign personal guarantees and/or provide a secured interest in favor of the borrower. I know this may seem like I am overcomplicating the situation but I have seen a number of partnerships dissolve and I am familiar with the cost and frustration of litigation. I always tell my clients that if you go into to business with other inviduals, you must assume the partnership will fail.
ok here’s my question i want to form a limited partnership
i have 4 limited partners with verball agreements and me and my wife as the general partners. each of the limited partners will contribute 5000.00 to 15,000.00 in cash with a total of about 40,000-50,000 of hard cash. the purpose of the partnership will be to buy fix-up sell REO’s. we plan on using the the credit of the partnership to buy and the hard cash to fix-up. this is the problem us (me and my wife) have a recent banckruptcy and we are the general partners. the limited partners have very good credit.will this cause a problem when we barrow money?can all or just one limited partner buy the REO and quitclaim it to the partnership? with the understanding that whoever buys the property first gives there personnall garentee on the loan.
also what percent of liability does that partner relize if he quitclaims to the partnership,and the partnership defaults on the mortgage? any help anyone can give would be helpful. thank you fred p.s. each of the partners of the partnership will be L.L.C.'s ,we will also sign a written agreement as soon as this is resolved