Thanks for the advice. It is a five bedroom place and they will be taking two of the rooms. We plan on completing renovations and selling within three years.
The other investers are co-workers I have had friendships with for years and the tenants will also be co-workers.
We are putting together a buy-sell agreement with our lawyer and will put myself/wife on the deed from the closing. We will also have signed contracts documents regarding how to disperse surplus rental funds, how to cover up-keep and renovation expenses, what improvements to make on the property and when to make them.
As I said before, we are good friends, and although I realize financial disagreements can cause rifts in relationships, I don’t believe anyone would purposedly screw the others over.
At the same time we are novices and are worried about having the realtor, mortgage broker, inspector, or lawyer taking advantage of us.
Me and two friends are buying a rental property. Since it will be their primary residence and not mine, the mortgage broker want to only put them on the mortgage and add me to the deed afterwards. Are there any negatives, problems, or pitfalls I should be aware of? Do will still have equal control ovewr the property?
Re: can you be on a deed but not a mortgage - Posted by River City
Posted by River City on January 08, 2006 at 15:25:58:
I believe your broker was advising you to be on the deed but not obligated on the Note. The mortgage does not obligate you on the loan, the Note does. The mortgage explains that the loan is secured by the property and explains the forclosure procedures and responsibilities of the parties involved.
The problem I see is when the deed is changed to add you. The lender will have the option to call the loan due and payable in full because of the change in title. If you were married and added a spouse, this is accepted, but you are not married to your friends and this would be a business venture, so changing the names on the deed would most likely not be acceptable with the lender. If you want your name on the deed with your friends, you also need to qualify with the lender on the loan.
Actually having person A qualify for the loan then at closing adding person b to the deed is done quiet often when husband and wife are purchasing the house. Husband (working spouse) will qualify then at closing wife is added to deed either by quit claiming 50% to wife or by other means. Not sure on other scenarios.
HUD 1 fraud in the works? - Posted by John Merchant
Posted by John Merchant on January 04, 2006 at 14:04:01:
Sounds to me like a little HUD 1 fudging (perjury, or lying under oath actually)might be in works here, if the borrower’s HUD 1 says one thing but the actual deal is something else…with your being “added onto deed” after the loan docs and closing.
Anybody, including you, who’s a knowing party to this fraud is potentially liable to be prosecuted by feds as an accomplice to that felony fraud. And they’re really on the lookout for exactly this.
For a variety of reasons, primarily greed I suspect, mortgage brokers just don’t seem to get this and they keep on with same old schemes, having the borrowers’ HUD 1s say one thing, with actual facts being something else entirely…and the feds keep on pursuing, indicting and convicting these felony offenders.
Re: can you be on a deed but not a mortgage - Posted by dealmaker
Posted by dealmaker on January 02, 2006 at 16:54:51:
Slow down a bit! You say it will be a “rental property”, but their primary residence? Is it a duplex or triplex?
Do you have a buy-sell agreement on how one or more of you can get out of this deal down the road?
Don’t let the mortgage broker give you legal advice! You need to be on the deed from the closing!
I really hope you’ll give this a LOT OF THOUGHT before proceeding. Get some books on “partnerships” and study them. There are a lot of advantages to partnerships but there are also a ton of disadvantages.