Two parties investing in multi-property, big question
Question: I need some advice on purchasing a multi-family home in NY with an associate, sharing equal title ownership.
What I would like is for my share to be paying the down payment, about 30%, and have the other party pay the remaining 70% (mostly with a mortgage).
To balance this, the other party would be responsible for collecting and handling all the rental income.
Once the home is paid off, I would like the rental income to be shared 50/50.
Is this done, is it common, is it even possible? Is a contract necessary?
Answer: Definitely necessary. You need to specify such things as:
- one person wants to buy the other out. How is this handled? Be careful with ’shotgun’ clauses!
- one person wants out. What if the mortgage is still too large for the remaining person to assume alone?
- one person dies, or is otherwise unable to perform his contracted tasks. What happens then?
- one person declares bankruptcy. Can the other be held in some way financially liable?
I’m sure there are other possible scenarios. A brief chat with a laywer might be in order… 1) what happens if it becomes necessary to sell the property *before* the mortgage is paid off — how do you determine how much equity each owner has? Don’t think this is possible? Look up the government’s power of “eminent domain” — you don’t necessarily have any choice. 2) What happens if one party *dies*? The ‘estate’ has different priorities than the living person did. 3) Who is responsible if expenses are higher than income? Suppose tenants move out, and you can’t replace them _immediately_. 4) suppose there are _large_ unexpected expenses, who pays? A “normal wear-and-tear issue” that is not covered by insurance. Like the furnace dies in the middle of the winter. Or lead-based paint is discovered on the walls. Or the electrical wiring is discovered to be ‘deficient’ to code requirements. Or a termite infestation is discovered. Or, or, or..
What if a tornado, or similar ‘natural disaster’, renders the place ‘unlivable’, until it is rebuilt. Yes, you have “insurance” that covers the cost of the re-building, but _what_about_ the expenses (like the mortgage) that are *still* running, even though there is no income to pay them?
Related Posts
Filed under: Mortgage Question
Leave a Comment
XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
TrackBack URL | RSS feed for comments on this post.