Loans Answers

Advice Needed

Question: Would anyone with real estate investing experience please help me with this problem?

Goal: Partner and I want to invest in foreclosures/fixer-uppers since we have remodeled many houses in the past.

I have the credit, job, and income to support monthly mortgage payments and have been approved.

He has the money necessary for closing and materials for repairs.

We want to be in together 50/50 as a partnership and want to start a “business” but the loan must be in my name for the first loan (since 10-30% down is out of reach for us now) and I can now get a 3% loan. How would you structure the arrangement so that each party is equal? And once the house is sold, how do you deal with the profit? 1031 roll-over? And if so, is the rollover on the TOTAL profit (selling $$ – bought $$) or on the house’s basis (sell $$ – bought $$ – minus improvements $$)?

The important part is that after selling each property and (hypothetically) making a profit, how do we make sure we can get cash from the 1st property to fix up the 2nd?

Any help would be appreciated,

Answer: We want to be in together 50/50 as a partnership and want to start a “business” but the loan must be in my name for the first loan (since 10-30% down is out of reach for us now) and I can now get a 3% loan. How would you structure the arrangement so that each party is equal? And once the house is sold, how do you deal with the profit? 1031 roll-over? And if so, is the rollover on the TOTAL profit (selling $$ – bought $$) or on the house’s basis (sell $$ – bought $$ – minus improvements $$)?

The structure is not that tough. YOu can BOTH be on the house, as owners, but you stil the only mortgage holder. OR, you can have a side deal stating, in writng, taht he will receive 50% of the profits. BOth are legal. Depends on wher you are getting the loan. They may or may not allow two names on deed.

1031 works, but may not be as important the first time or two. YOur tax bracket willd etermine if it is worth it, adn the total profit too. TO get a qualified intermediary is not free. IF the profit is small, or the liability is small, don;t do it. IF you hit a nice triple (you nkow, not quite a home run, but a GOOD deal), it is probably worth it then. DON’t taint it by screwing up on the intermediary. That is the #1 reson for 1031’s to be rejected by the IRS after the fact.

Once you get a loan,and buy the first one, with a little trust from your partner, you can do okay. By the third or fourth, you should have a relationship built at a bank. Good luck. Fixer uppers work well, but don’t spread yourself too thin. IF you can t carry that mortgage, and it does not sell as fast as you want, you may be in trouble. (ie don’t leverage yourself too much for survival)

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