Good Afternoon: I, along with three other friends, would like to invest in rental property (turnkey). I live in a major city (Washington, DC) and would like to not any mistakes when selecting a property. I would much rather like to purchase here with a management company handling the complaints, collecting the rent, paying the utilities, etc. How do I certify that companies such as Roofstock.com are legitimate if we decide to purchase out of the area? Should we have a business license, charter, etc., before we proceed? How will we handle if someone wants to get out of the group (we will be saving a substantial amount each month – should we buy the partner(s) out?) How do we clarify specifics in the charter?
Great questions! Roofstock is a legitimate company. Have you read our articles on turnkey properties? If not, I’ll include links here for you. Although they are legit, you must do your due diligence, know how to evaluate the property, and I can’t stress strongly enough to hire an attorney and accountant who work with real estate investors. You won’t need them for everything, but it is good to get expert counsel to avoid pitfalls. Though turnkeys often come fully rehabbed with a management company in place (and sometimes tenants!) it’s not 100% passive. You’ll still have some work to do.
As far as your partnership, you’ll need an LLC operating agreement. I’ve also included a link to an article with a template on that, but exactly how you structure it, etc., I’d advise at the very least having an attorney review your operating agreement before signing. Exit strategies need to be in place and agree upon by all parties involved.
Here are the links and I hope this helps!
LLC operating agreement: https://fitsmallbusiness.com/llc-operating-agreement-template/
Setting up an LLC: https://fitsmallbusiness.com/start-a-real-estate-holding-company/?fst=555291
Turnkey real estate: https://fitsmallbusiness.com/turnkey-real-estate-properties/
A property management company is great, to find one you trust I would recommend yelp reviews for your area, you’d be surprised what you can find, the biggest thing you want is to look at user reviews and see what works for you. Are you planning to go into business or is this just for a short term gain? You can always go the route of LLC and have anyone who wants to leave buy you out by paying out whatever initial investment was thrown in which you can add into your contractual bi-laws.