How to start, partner with cash, now what?

[ngrant99]

Hello All.
I'm new to this so please be kind.. Here is the situation I have partner who would like to go into business with me flipping homes. He is willing to put up money but would like it to be in some sort of business. How do we go about starting this business. When we do start how can we get finacing if the bussiness is a LLC?

[justin0419]

To start a LLC, you have to file the Articles of Organization with your state and pay their fees to establish your LLC.  You should also apply for an EIN (Employer Identification Number) for your business.  This is like a SS# for your business.  You can have your LLC taxed as a partnership.  You should have a good Operating Agreement drafted (preferrably by a lawyer or at least have a lawyer look at what you put together) which spells out exactly how the business is to be run.  You'll find that some banks and insurance companies won't deal with a business entity.  You just have to keep looking around to find some that will.  You're going to have to personally guarantee the loans to the LLC while it's still new. 
Before doing this, you should talk about what each person is going to contribute with respect to time, money, labor, etc.  Talk about the plan for your business.  What kind of homes are you going to flip?  Are you going to rehab any of them or simply flip them?  Think about these things in the beginning.

[Nick Brian]

Thanks justin for the helpful comment. I would have suggested the same for grant. Hope newbie members find it useful. Nick Brian.

[ngrant99]

Thanks for the respones. After reading more about starting an llc it seams that it's not worth it when your just starting out.

So this is where i'm at and any other comments would be helpful. I'm looking at rehabing homes. I am real estate appraiser / full time firefighter so have have a good understanding of what is a good deal and what isn't, and a solid job to back me.  I have a father in law that is interested in investing in these homes with me but he wants to keep his assests seperate from the business. I have a home with a mortgage and very little home equity. My father in law has said that he would front a portian of money, probely enough for for 25% down payment, but i would still need to get finacing. where do i start? What do I do first?

[bobmayo56]

Many banks will question where your down payment came from and back out if they find out it is really a loan.  Ideally they would like people to save up the down payment themselves, as it demonstrates the money-management skills and financial cushion needed to handle the mortgage payments.

One possible solution is to put the money into your checking account and let it age for several months.  During this time find out the policies of various banks to see which ones will lend to you given the down payment situation.   Once you find one with acceptable policies get a pre-qualification letter from them, and then go shopping for your 1st rehab property.

[yrush2000]

Starting an LLC is not alot of work.  However having a partnership go wrong is alot  work.  Goto a CPA and get set up.  You did not become a firefighter by reading a book you got training and guidance.  A CPA and lawyer will do the same.  If anything, you buy the homes in your name and transfer the properties to the LLC which is in both names once the closing happens.  This is not only or protection against your assets, but also tax reasons.

Honestly doing business with family is one of the worst things that can happen as well. Have you thought about the consequences if a deal goes bad and your father in law loses money and has he thought about it as well.

As for loans..Talk to some brokers of course.  Your best bet is to open a joint account so dad still has access to his money.  Banks want to see the money seasoned which use to be 3 months, check with a broker.  No season loans are probably hard to find now.