Two Investor Questions - Posted by Paul H

Real Estate Investing Real Estate Law
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Posted by Jimmy on July 07, 2005 at 06:57:55:

The limiting factor seems to be the need to keep this guy off title, and out of view of the lender.

This rules out a tenancy in common (or other joint ownership) arrangement. It also rules out a general partnership.

You can enter into a contractual relationship with your buddy, that spells out his rewards and responsibilities. He is not on title, and not an owner. But he has some rights which will benefit him, so long as he lives up to his end of the deal. I have never drafted such an agreement, but someone out there must have done so at some point.

If done property, this guy will not be a partner, a co-owner or a lender. and you can answer the loan application questions truthfully.

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Two Investor Questions - Posted by Paul H

Posted by Paul H on July 06, 2005 at 24:33:25:

Okay, I have read the How to Beat the Due on Sale Clause Article, but am still unclear on something. Here is my scenario:

A friend of mine and I decided to start buying investment property together - we are going to use them as rentals. We found a house, but putting him on the loan would have jacked our rates up, so I bought the house in my name. We want to split everything - I want him to reimburse me for 50% of the down payment, closing costs, etc …, and we will split all other costs going forward.

My questions are: If I don’t put him on the deed to avoid the due on sale clause, can he still get half the tax benefits? What is the best way to proceed?

Thanks in advance!

Paul H.

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Re: Two Investor Questions - Posted by Frank Chin

Posted by Frank Chin on July 08, 2005 at 07:34:23:

Paul:

I had trouble with a refi in a mortgage once, when I included my mother-in-law, who was a partner with me on one property. The funny part was we put in TWO mortgages for refi at the same time, the one solely in “me and my wife’s” name was approved, and the other one, with my mother-in-law on the deed was still being reviewed.

It was explained that if the person is on the deed, it’ll have to be on the mortgage. BUT, we then called several other banks, explained the sitiuation, and some said that mom would also apply for a mortgage with us, and we can request that it be approved based on OUR CREDIT ONLY. This approach may work for you and your partner.

So we filed an application with CITIBANK, and it was done on that basis, in a week, whereas it was kicked around the other lender for 2 months.

It’s a long story, but mom invests in RE with her son on the west coast, and they own a few properties between them. The bank ask for her tax returns, and the income for those.

They tell us the debt equity was high incluidng her. But we explained her son is a doctor, has another income to cover those properties, that’s not in her application. So they ask for his (the doctor’s) tax returns too.

Well as it turns out, he also own properties with other doctors. So if we we going to ask for EVERYONE’s tax returns down the chain, by the time its done, they’ll need tax returns for half the doctors in California.

It got ridiculous before we got Citibank.

Frank Chin