How to set up investments with partners. What's going on YouTube? It's Matt Faircloth. Thank
you for watching Mentorship Monday. Today's question comes from Ahmed. Thank you, Ahmed,
for your question. Now, Ahmed wants to know about setting up LLCs for partnering. He's
putting together some partners and he wants to know what a fair way to split it up, and
all that. Ahmed's already got a few deals going, he already has an LLC right now, and
he has some family that invest with him. By the way, family is like 80, 90% of people
that I know that get started in investing in equity with other people do it with people
like, either friends or family. That's just how it goes. If you're trying to meet your
very first investor on Bigger Pockets, odds are it's going to be a friend or a family
member of yours that has extra cash, but no time, you got the time, let them invest with
you. I digress. That's another thing that another topic for another Mentorship Monday.
But, today I'm Ahmed wants to talk about taking what he has now, which is an LLC, and, in
this, I have a very small share, 20%, which he paid for, so he has 20% of the LLC. He
bought in, and Ahmed's also the operator of the LLC, so call it the asset manager, the
one that deals with the property manager, even maybe managing the property directly.
Ahmed's the front man for the LLC, and he also has 20% and he had to buy that with his
family around him. Number one, Ahmed, that's a mistake you made there because he's looking
to, this leads to my next question. I'm trying to buy much more significant property, 300
to 500,000. That's the next deal. Ahmed wants to scale up and maybe do a larger deal. Right?
Here's the deal, Ahmed, and for all you guys watching too. It's great that you bought into
the company, and I think that, for those of you that can, do. Buy some shares of companies
that, if you're going to form a partnership, it's great to have some skin to throw into
the game too. Some investors will not invest with you unless you have money in too, in
that. But, you can't discount the value of the legwork that you're going to do. I call
it the action taker, the doer, and then the investor. Right? You can be an investor and
doer at the same time, but the doer, the one that's following up with the property manager,
finding the deal, running the numbers on the property, you probably cutting checks for
distribution and being the legs of the deal, most likely is the one. There's only one,
typically one person that does that, and then there's a bunch of passive investors around
them that just receive a return on their money.
You can have partnerships where there's different people that all take action, but most likely,
they're silent investors, and one to two action takers. The folks that are taking action and
doing the doing of the deal, that's sweat equity. It might not be dollar equity or cash
that you put in, but there is sweat equity that you should be compensated for associated
with that. That right there, Ahmed, is how you gain yourself a larger chunk of the next
deal, is by valuing the time you're going to put in to find it, run it, manage it, hold
whoever's running the deal accountable, the property manager, or whatever, managing yourself,
all that stuff. That's all worth money and you should be giving yourself a chunk for
that.
How would I set up the shares in the company? That's it. You do that with an LLC by having
members and managers. A lot of people use LPs where there's a general partner and then
limited partners. Either one's fine. Talk to an attorney, of course. I can't direct
you on how to set that up. You got to talk to your [inaudible 00:03:26] to a lawyer,
because state laws regulate those kinds of things. I don't want you to suing me, so to
talk to a lawyer and they'll help you set it up. Anyway, that's it, Ahmed. Thank you
for your question, and thank you guys for watching Mentorship Monday.
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