Partnership - Posted by Bruce

Posted by Jason (SC) on February 13, 2006 at 11:23:49:

you are right there is normally a Due on Sale clause in most mortgages. I wouldn’t be concerned with it. ihave heard of a few times note holders calling in mortgages, but it seems to be few and far between. As long as the mortgagee is a member of the LLC I think you don’t have anything to worry about.

Of course i’m not a lawyer or an accountant, So my answers are just my opinions


Partnership - Posted by Bruce

Posted by Bruce on February 06, 2006 at 07:21:51:

A friend and I are interesting in forming a partnership and purchasing a few residential rental properties. We have a few questions about financing.

If we want to be 50-50 partners does this mean we have to apply for mortgages jointly in order to share in the debts equally? If so will this limit our ability to borrow if we are both considered liable for the same debts?

If we form an LLC to limit our liability does that mean we have to apply for a mortgage in the name of the LLC? Will this make our mortgage rates higher? If so how can we get the protection we want without paying higher rates?

One of us has no significant income right now due to a career change but has plenty of assets and great credit (FICO of around 780). The other has very stable employment income, not nearly as much in assets. How does this impact our ability to obtain mortgages and the approach to applying separately or jointly.

THANKS for any help you can provide!

Re: Partnership - Posted by Jason (SC)

Posted by Jason (SC) on February 11, 2006 at 22:26:16:

I’ve seen this and done this before. My recomendation would be to use one persons credit on each property and either deed it to a jointly owned LLC or add the others persons name to the deed after closing. The LLC should have operating documents protecting each partner. If you try to each be on every loan, it could limit your ability to borrow. There are so many ways to structure this between the 2 of you, you could write a book. Generally the bank is only going to do so many loans for each of you. Debt to income ratios effect credit scores and LTVs and there are always hoops to jump thru when you get over 4 or 5 loans.

I’ve done deals with people just because they could get better LTVs than I could. After you guys max each other out, find credit partners to partner wth your LLC or create new LLCs with. I know guys who never get loans using thier own credit. Buying good deals can limit you even if you have cash flow.


Re: Partnership - Posted by Joy

Posted by Joy on February 09, 2006 at 12:31:16:

I am in the same situation as you. We are in the process of forming a partnership with a group of friends (my husband and I, plus 3 others). We would like to develop some land that my husband and I own and are currently paying for it. We would like to use the land as part of our down payment and the others put the money, how will this work?

Re: Partnership - Posted by Bruce C

Posted by Bruce C on February 13, 2006 at 07:20:20:

Thanks Jason. You confirmed some things that I already thought. When you deed the property to the LLC doesn’t that trigger a clause in the mortgage that forces you to pay off the loan? I’ve been told that property owners simply ignore this and the lender never knows the difference.