Contract between brothers - Cash deals

**jnzy111** · 04-15-2009, 01:26 PM

I'm currently trying to formulate a deal with my brother to buy houses with cash. He has the cash, I have the RE experience and a good rehabbing team.

Currently I own 5 Single Family houses and am hitting what I call the "sweet spot" where I've located a great area and way to get about $800 a month positive on each property.

My brother who apparently has way more money than I ever thought approached me and showed some interest in buying houses together. Since I'm out of money for down payments to buy more, this sounds like it could be a great idea.

So far, this is what I have drafted up to get him to put up his hard earned cash..

I am "Brother to manage", he is "Brother with cash"

1) Offer Cash and to Close in 15 days

2) Setup Escrow and title to be held under Brother with cash and Brother to manage

3) Down Payment, Closing costs and Remaining of purchase price to be covered by Brother with cash (Original Investment)

4) Brother to manage to Handle Repairs and upgrades to get into "Loanable" and "Rentable" condition (expenses to be split 50/50)

5) Brother to manage will manage the property (Handle renters, repairs, advertising, etc.)

6) Brother with cash to refinance in his name and receive funds later (30 year fixed preferred)

7) Brother with cash to Claim all interest and depreciation (he's crying about no tax write offs)

8) Brother with cash and Brother to manage split Income (including income taxes) 50/50

9) Brother with cash and Brother to manage split all carrying costs (Mortgage, Insurance, repairs, taxes,etc)

10) Upon sale of property Brother with cash receives original investment or difference if not covered fully by refinance

11) Brother with cash and Brother to manage to then split any remaining equity

12) Put property into an LLC or umbrella policy

Please let me know what you think....

**REITrainingWhse** · 04-22-2009, 03:24 PM

Hello,

Why don't you just form a partnership, be it a GLP, LLP or a LLC where you and your brother is 50% partners.

Then in the operating agreement you mention your roles, each gets a K-1 for tax purposes, which would be 50% split. The title is in the partnership, and all proceeds are business income.

Then you share the tax burdens/benefits, you have business write-offs, you have ...

It would make life every simple and straight forward.

Do you see anything that would be missing??

Let me know.

Michael Suess
The REI Training Warehouse, LLC

**jnzy111** · 04-23-2009, 11:00 AM

Thanks for the input Michael, that is along the lines of what we intend to do although we were thinking more like doing an LLC for each property since my understanding is that if a law suit is filed against your LLC you could potentially lose all properties that are under that LLC.

Would a GLP or LLP make more sense in this type of situation?

---Mike

Originally Posted by REITrainingWhse

Hello,

Why don't you just form a partnership, be it a GLP, LLP or a LLC where you and your brother is 50% partners.

Then in the operating agreement you mention your roles, each gets a K-1 for tax purposes, which would be 50% split. The title is in the partnership, and all proceeds are business income.

Then you share the tax burdens/benefits, you have business write-offs, you have ...

It would make life every simple and straight forward.

Do you see anything that would be missing??

Let me know.

Michael Suess
The REI Training Warehouse, LLC

**REITrainingWhse** · 04-23-2009, 12:09 PM

Well, it all depends on the exposure to lawsuits you will have.

If you are going to hold these proerties long, then you might want to hold them in separate LLCs, or put them in individual trusts, where the trustee could be an LLC, or ... There are hundreds of ways to setup asset protection, it all depends on how you will be liable for lawsuits.

Some techniques are good if the risk is low, and some are needed when the risks are high, some are good for small amounts of equity, where if you have large amounts, you need to structure things differently... Of course the more complex you get the more it will cost you to setup.

It all comes down to exposure, but separate LLCs is a simple and widely used asset protection strategy. Just that you will need to manage them all, which could be a nightmare when you get several of them. Plus if you are not holding long, the red tape might not be necessary to have several LLCs.

To many questions unanswered to give you any good direction, but I have given you something to think about.

Later!