Doing my FIRST JV deal but one problem here...

[WadeSha]

Dear fellow investors,



I am doing my first JV deal where both my partner and I contribute to down payment but only my partner himself qualifies for the mortgage and goes on title. I was talking to my mortgage broker and was told that lenders do not like this kind of deal (with me being a silent investor) and will probably not approve the mortgage without me being a co-applicant. If that is the case, my question is:



in a classic 50/50 split JV deal where the deal finder contributes time and expertise while the investor contributes 100% down payment and qualifies for the mortgage/goes on title alone, how does it work if the lenders do not approve this type of deal?



A little bit about my investing background: I started out as a full-time RE investor end of last year and bought one rental property ever since. I do not want to co-sign the mortgage application because I have run out of credit and with no employment income I am afraid co-signing a mortgage will disqualify the deal especially when my partner's financial/credit status is not strong either.



Thanks a lot for any feedback!



Wade

 

[Thomas Beyer]

Both on title and mortgage is very common.

50% for the money partner(s) (incl. your money split pro-rata), 30% for expert and 20% for mortgage qualifier is fair .. so maybe 45 / 55 is fair overall.



Put your mortgage application in and see where it goes.

 

[sdurand]

I have been involved in 2 JV in the last 2 years:



1. I found and negotiated the deal. I also manage the property as my partner is over 3 hours away. My partner sourced both the mortgage and the down payment. I was added to title after the purchase. We share everything 50/50 (expenses, profits, appreciation, etc...).



2. I found and negotiated the deal. I provided 50% of the down payment. I also deal with advertising for rent, and handle all of the reference checks, security checks, application process, etc... My partner provided the other 50% of the down payment and sourced the mortgage. And manages the local needs of the property (showings, repairs) The bank did not have an issue with me providing part of the upfront money, but would not let me on the purchase or title. I will add my name to title now that the purchase is through. We split everything 50/50 (expenses, cash flow, appreciation, etc...)



So I agree with Thomas, put it in and see what concerns may exist.

 

[WadeSha]

[quote user=ThomasBeyer]Both on title and mortgage is very common.

50% for the money partner(s) (incl. your money split pro-rata), 30% for expert and 20% for mortgage qualifier is fair .. so maybe 45 / 55 is fair overall.



Put your mortgage application in and see where it goes.




Thanks a lot, Thomas, for your input! I think if I work really hard on the lenders, the deal will go through, however, I am pretty sure my next deal will get stuck as I reach my borrowing limit. Plus, when I build up enough credit, I want to buy the property myself or with my wife as it is a lot less hassle than doing it with a JV partner.

 

[WadeSha]

[quote user=sdurand]I have been involved in 2 JV in the last 2 years:



1. I found and negotiated the deal. I also manage the property as my partner is over 3 hours away. My partner sourced both the mortgage and the down payment. I was added to title after the purchase. We share everything 50/50 (expenses, profits, appreciation, etc...).



2. I found and negotiated the deal. I provided 50% of the down payment. I also deal with advertising for rent, and handle all of the reference checks, security checks, application process, etc... My partner provided the other 50% of the down payment and sourced the mortgage. And manages the local needs of the property (showings, repairs) The bank did not have an issue with me providing part of the upfront money, but would not let me on the purchase or title. I will add my name to title now that the purchase is through. We split everything 50/50 (expenses, cash flow, appreciation, etc...)



So I agree with Thomas, put it in and see what concerns may exist.




That is very enlightening, sdurand, thank you very much! However, my further questions are:



In deal 1, why didn't you have your name on the mortgage and title in the first place? Is it easier to add your name after the purchase in terms of mortgage approval?



In deal 2, why didn't the bank let you on the purchase or title? Was it because of your debt level? If so, what makes you think they will allow you to add your name to the title after the purchase because by doing so you are taking over 50% of the mortgage responsibility, hence more debt.

 

[Thomas Beyer]

[quote user=WadeSha]I want to buy the property myself or with my wife as it is a lot less hassle than doing it with a JV partner.
That is true. But true is also that you will be able to make more money by buying more properties, and the only way to do that is to do JVs. But yes, it is more work upfront. You are the master of your domain, so arrange real estate to suit your needs, and that maybe a few JVs, a lot of JVs or no JVs at all.

 

[WadeSha]

Thank you, Thomas, as long as I can max out my credit with JVs, I will definitely do more JVs, more work upfront is not a major issue here.