I have a quick question regarding the legalities/tax issues for pooling investments from 5-7 investors to buy a house for cash. The plan is to set up an company to buy the house and have the investors write a check for their share of the property.

Say the house is $140k, 7 investors put in $20k. I will handle getting tenants to sign leases and being responsible for upkeep/maintenance. Investors will receive some portion of the monthly income while the sale price of the house (3-5 years from now) will be divided per their original proportions of initial payment.

What is the best way to handle this from a legal structure standpoint (llc, s-corp, llp?)
Are there any extra hoops to jump through if your company's annual income is solely based on leasers?
What % of purchase price should be on hand for me to have as emergency funds?
What kind of paperwork is required to make sure all parties stay within the intent of the above?

Also, say the monthly cash flow generated by the 3 leasers is $1400/month net, what percentage of this would be fair for me to keep as the administrator? Side note: I will be putting up some of the initial investment as well, so I will also be a partner.

Also, if any of this is off base, please feel free to throw in some criticism. This is in the early stages but I do have verbals from 4 individuals totaling about $100k

It sounds like a huge hassle for the expected reward.

As far as answering your questions I cannot. But I'm interested to see what other people say.

Generally-speaking: partners = problems.

Hope this works out well for you & all involved, but I doubt it will.

Um, well you are going to want to set out who has control, a voting system in the charter. Have everyone investing read and sign said charter. You will want a pre-outlined cashout system as well as the exact way to calculate value at cashout whether it be rent x months or 1/7th of average of 3 appraisers. You want to set out a very clearly defined servicing fee, outside of your investment return as part of rents or whatever.

Basically go through each and every step of the process of buying, renting, selling shares, who gets to decide what etc. Get it all in writing, give out 7 copies, and then put yours in a security deposit box somewhere. You should also have a forced liquidation clause in which if theres an X amount of partners that vote and pay, they can vote to forcibly kick someone out. Have contingencies for stalemate situations where one guy wants to stall the entire operation, or you want to kick one guy who is annoying as **** out.

You'll want to consult a local attorney/tax expert on which types of corporations are recognized/advantageous in your state and how well said charters hold up in the court of law.

Just prepare for a situation where 6 people litigate 1 person, and figure out what you'd want in writing for that situation.

+1

There is a reason REITs exist.

TIC?

I am sorry, I haven't even finished reading the OP, but after reading a few lines I want to suggest an LLP or LLC. Its transparent and each member is responsible for paying taxex according to their shares/income. I'd suggest LLC only if you want to keep doing business with the same partners in the future.
Good Luck