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Let's say I want to buy a property and I have a partner (non-related, but a best friend since grade school).
He wants to go in on a house with me as an investment. In this scenario, he would supply 10 percent in cash (I'd give an additional 5) and that would be a 15 percent down payment. I would also cover 90 percent of closing costs.
I would hold the mortgage, live in the house with my wife, pay the taxes etc. he would be a "silent partner."
It's basically a way for a buddy to help out with a bigger down payment - and maybe make a little money if the market rebounds.
He would want a ten percent interest in the house, and collect when we sell it. (or in 5 years or so, I could re-fi and buy him out if he wants.)
We trust each other, so there's no worries there and he has the scratch to spare.
Is there a model that works for this? I want to do everything on the up and up, so I don't want to call it a gift when it's not or lie to the bank.
Also, it's not really a loan, because he doesn't expect repayment until I sell the house (or refinance). It's an investment.
I can get the loan without his help, but it would take a bunch of pressure off me.
Best way to structure it would be to either get an attorney to draw up an agreement and list him on the mortgage as a non-occupying owner, or have him gift you the 10% and keep him off of all the documents. He can't be on the deed without being on the mortgage at the time of closing, and he's crazy to not be on the deed, friend or no friend.
You could have a lawyer draw up a seperate contract between the two of you. Buy the house in your name and he will have in writing the exact terms and expectations of the ownership of the house or loan or investment, whatever you call it. In any event, have the agreement between you and your frined in writing with witnesses(ie lawyer).
Otherwise, do not do it.
Last edited by ShaneSA; 03-23-2009 at 10:19 PM..
Reason: afterthought
absolutely would have it in writing. He's a lawyer, he could draw it up and I'd have my lawyer look it over.
What we'll likely do is I'll put the money up front at closing, from my accounts. Then after I take possession I could let him buy in and work it out. Maybe we could call it a Private Second Mortgage?
Bottom line, to avoid having to make it a "gift" or otherwise lying to the bank, I'll take the money out of my account, then have him replace it when he "buys in." Feels the most legit... and we're both all about being legit.
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