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JV - When one Investor is on Title and Mortgage

Nir

Nir

0
REIN Member
Joined
Dec 5, 2007
Messages
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Hi All,

Assuming investor# 2 has no employment income, will purchasing say 4 such properties improve his financial situation (future mortgage applications) significantly so he may qualify for a loan alone in the future based on his JV agreements (50% 50% ownership etc.) although NOT shown on any title and NOT on any mortgage?

In other ways, is it an issue for most mortgage brokers to consider such properties to qualify an applicant whose name is not on titles/mortgages, or is it not an issue at all as long as the investor can prove ownership by presenting JV agreements?

THANKS,
Neil
 
QUOTE (investmart @ Oct 1 2008, 06:13 PM) Hi All,

Assuming investor# 2 has no employment income, will purchasing say 4 such properties improve his financial situation (future mortgage applications) significantly so he may qualify for a loan alone in the future based on his JV agreements (50% 50% ownership etc.) although NOT shown on any title and NOT on any mortgage?

In other ways, is it an issue for most mortgage brokers to consider such properties to qualify an applicant whose name is not on titles/mortgages, or is it not an issue at all as long as the investor can prove ownership by presenting JV agreements?

THANKS,
Neil

Unfortunatly, if investor #2 is not on title or mortgage, those properties would only be included in the application as part of his net worth. They could not be used for qualifying purposes as he not financially responsible for those loans, nor the beneficiary of the rents. It works the other way around as well, if the JV partner is on title/mortgage, those loans must be included in his debt servicing ratios which could be either detrimental or beneficial, depending on the cashflow.

Hope that helps,
 
So let me get this straight. You`re saying that if an investor has a group of investment properties & She/He is not on title or mortgage, they will not count towards thier net worth but not used as qualifying addtional income? Is this true even if these properties are appearing on this person`s income tax return?
 
QUOTE (thejules @ Oct 2 2008, 08:44 AM) So let me get this straight. You`re saying that if an investor has a group of investment properties & She/He is not on title or mortgage, they will not count towards thier net worth but not used as qualifying addtional income? Is this true even if these properties are appearing on this person`s income tax return?


Hi Jules,

They do go towards the clients net worth, but are not included in the real estate portfolio if that is what is being used to qualify. If they are showing income from the tax return, that would go towards the individuals personal qualifying income.

As always, files are underwritten on a case by case basis and guidelines depend on the lender and the situation. These are just the rules of thumb.

Thanks
 
Thanks Peter,

Like Jules, I am also surprised that the investor who is not on title and not on mortgage can NOT use the properties` rents as proven income for the purpose of applying for a mortgage even if he can prove that income by providing the relevant JV agreements.

I understand from you (from previous discussions) that some lenders may accept an application even without income so long as the portfolio and subject property are over 1.1. Is this option also NOT available for the investor who is not on title and not on mortgage even if he can prove 50% ownership by providing JV agreements?

I currently purchase under my name but consider purchasing with others in the future (perhaps not being on title and on mortgage myself) UNLESS you are saying this type of purchase can negatively affect or at least not help with future applications(?)

Regards,
Neil
 
Hey Pete!

Well it make my situation not so complicated to package up. I guess? But at what point does net worth play an important part of the qualifying process. I realize that equity is good and debt is not so good...
 
Unfortunatley lenders do not care a whole lot about net worth. They only care about income and debt. Not haveing your name on the properties is likely a benefit to you (unless they cash flow real strong) because if they do use your rentals properties they only give you credit for maximum 80% of the rent but they take all of the expense. So it doesn`t take very many properties to start really effecting your debt service ratios. Also if you are on title with a partner some lenders will only use 50% of the 80% but still use 100% of the expense.

Every situation has many variables. And now more than ever you need a long term plan.
 
I`ve been there and played that one. This is an interesting dicussion.
 
QUOTE (investmart @ Oct 2 2008, 11:40 AM) Thanks Peter,

Like Jules, I am also surprised that the investor who is not on title and not on mortgage can NOT use the properties` rents as proven income for the purpose of applying for a mortgage even if he can prove that income by providing the relevant JV agreements.

I understand from you (from previous discussions) that some lenders may accept an application even without income so long as the portfolio and subject property are over 1.1. Is this option also NOT available for the investor who is not on title and not on mortgage even if he can prove 50% ownership by providing JV agreements?

I currently purchase under my name but consider purchasing with others in the future (perhaps not being on title and on mortgage myself) UNLESS you are saying this type of purchase can negatively affect or at least not help with future applications(?)

Regards,
Neil


If the rents are being claimed as taxable income, and reflected on the investors tax return, the income can obviously be used. You are correct, the 1.1 solution is available to the investor without alot of verifiable income so long as the subject property and portfolio is over 1.1. You will however need to have a portfolio of at least 3 properties (including the subject) and you must be on title for them in order to use them towards qualifying under the 1.1 rule.

Unless you are purchasing properties with excellent cashflow, from a qualifying perspective, going on mortgage/title will probably hinder more than help. Also, if you are not showing alot of personal verifiable income, it will be tougher to qualify your JV partners. When strutcuring lending as with most things, the simplest solution is often the best one.

Hope that helps,
 
Thank You Mike for the Great input!

The properties I consider purchasing with others cash flow REAL STRONG - around 2.0 ratio(!)

It is unfortunate that mortgage applicants who purchased with others on title, are evaluated the way you explained.

I understand the majority of the applications/portfolios you see behave differently where it is actually beneficial for the applicant NOT to be no title as you mentioned.

However, I do not understand the lenders` logic behind NOT considering POSITIVE cash flow properties owned by the applicant who is NOT on title but can prove 50% ownership based on JV agreement(?)

Regards,
Neil
 
Thank You Peter for the clarifications!

You mentioned "Unless you are purchasing properties with excellent cash flow, from a qualifying perspective, going on mortgage/title will probably hinder more than help." If I understand this correctly, you mean "hinder more than help" UNLESS 1.1 solution is applied(?) because earlier you explained that if 1.1 solution is applied then the opposite is true - the investor MUST be on title and on mortgage in order to qualify(?)

Also, you mentioned "it will be tougher to qualify your JV partners". Do you mean it will be tougher to qualify the JV partner when he is on title and I am not, or when I am on title and he is not? For example, if I purchase with a foreign investor who puts 35% down and I am on title and on mortgage (my understanding is the bank will prefer that option that only I will be on title and mortgage so they do not have to go after a foreigner in case there are issues), then it will be tougher to qualify my JV partner or will it not even be required in this case as he is not on title?

(I understand I am asking a new question now regarding a purchase not mentioned in my initial question above. The reason is I have 2 options going forward - purchase with a local investor who will be on title or with a foreign who will not. understanding both scenarios and their implications will help prepare for future applications)

Regards,
Neil
 
Neil, here is a suggestion
As Peter`s team mentioned "Files are underwritten on a case by case basis and guidelines depend on the lender and the situation"

Package up your Sophisticated Investor Binder and send it Peter`s office for you next application, or you can electronically send it to them as well (as they have a secured email account setting). You obviously need an expert on your team.

Peter`s team is brilliant at looking at Real Estate Investors portfolio`s from the 3,000 ft level, and do a tremendous job in securing the financing based upon upon your long term goals. They are not transactional based Mortgage Brokers but rather long term Relationship based brokers. They make sure they match the right Mortgage strategy to the right investor based upon your goals.

I have been using Peter`s office for the past 5 years and they do a fantastic job. Plus each year we sit down with a mortgage portfolio review which has been invaluable. I highly recommend eveyone at least once a year have a mortgage portfolio review, as we all grow as Real Estate investors our portfolio of mortgages becomes a large portfolio that needs management and optimization strategies.

I look forward to hearing your results after you send your information to Peter`s office

Cheers
 
Hello Russell,

Yes, that is my plan - to contact Peter`s team for the next purchase.

Regards,
Neil
 
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