Most private real estate investments are done through a Reg D 506 exemption. Read our blog post on Reg D 506 to learn more.
The first step in funding a real estate transaction is finding a great property and getting that property under contract. The team or individual who finds the property will probably show a proof of funds personally in order to put the property under contract. As soon as the contract is signed, the clock starts ticking to close. Depending on the transaction type (i.e. residential or commercial), it could be a 30-60+ day escrow.
While in escrow, the next step is to get all the paperwork ready to do a private real estate transaction including an operating agreement and a subscription agreement. In the operating agreement, it will outline who is the managing member of the LLC and who the limited members are, in addition to the role of all the members. Learn more about Passive Real Estate Investments and Investing as a Limited Member here.
From there, the process goes as follows:
- LLC Opened (2-5 days depending on state)
- EIN (Tax) Number requested from IRS for LLC (1 day)
- Bank Account opened with EIN number (same day as EIN number assigned)
- Investors sign operating agreement and subscription agreement
- Bank Account funded by investors
- Escrow funded with monies from Bank Account
- Escrow Closed
- Form D filed with states where investors are
The process can move faster or slower depending on how quickly investors need to close on a property and how eager the investors are to invest.