Real Estate Question

craigburmr

New Forum Member
Registered
Hello, I have a question regarding the structuring of a home loan for a rental and who would claim the gains/losses. My brother has a lot of money saved up but not so great credit so I would be the primary of the loan and he would be the co-signer is what the bank has told me we could do. We would both be on the deed and he would pay for 100% of the home's expenses, essentially all the responsibility of the home would be his. Do I need to have a partnership set up as an LP and GP, I would prefer to stay away from that if possible due to the obvious additional costs but if that’s how it needs to be done then so be it and then how would the sale of that look once he is able to refinance the property into his name only?
 

Thomas Beyer

Senior Forum Member
REIN Member
The owner will claim any gains or losses.

Who will be the owner? Both ? 50/50?

Are you American as the term “deed” is not Canadian ?

Would you pay rent? What happens if you stop paying rent?

Do you envision getting a first mortgage?

If your brothers money is not equity but a loan then you need to agree on an interest rate that is income to him ie taxable but it’s an expense too to the 50/50 owner and associated accounting.

No need to do a GP/LP.

Consider doing an undivided interest which is basically a 50/50 JV. Could be 80/20 or 40/60 or whatever you agree on.

Thomas Beyer, Asset Manager & Improver, Hard Asset Investor & DeFi Asset Hodler, Author, Father, Mentor, Hiker, Kayaker www.prestprop.com
 
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Manny Treivish

New Forum Member
REIN Member
There are so many options to do that. The big bank's policies are not flexible enough for the solution you need. But there are lenders that have policies that make this absolutely possible. You need a mortgage broker. You can ask any of the REIN partners that are brokering. And you can also call me https://linktr.ee/MannyTreivish . Don't take no for an answer. Good luck :)
 

KeithnCalgary

Mortgage Associate & REIA
REIN Member
Hello, I have a question regarding the structuring of a home loan for a rental and who would claim the gains/losses. My brother has a lot of money saved up but not so great credit so I would be the primary of the loan and he would be the co-signer is what the bank has told me we could do. We would both be on the deed and he would pay for 100% of the home's expenses, essentially all the responsibility of the home would be his. Do I need to have a partnership set up as an LP and GP, I would prefer to stay away from that if possible due to the obvious additional costs but if that’s how it needs to be done then so be it and then how would the sale of that look once he is able to refinance the property into his name only?
Hi Craig:

#1. If you can qualify for the mortgage then your brother could gift you the downpayment rather than being a co-signer. This way his credit does not negatively impact the application. As a mortgage broker, I have access to lenders who will allow the gifted down payment from immediate family.

#2. You would set up your Joint Venture agreement with your brother and that would be the guideline for all things related to the property including who is claiming what for tax purposes and register it on title after the mortgage has been registered. YOur professional accountant can best guide you on tax decisions. You do not necessarily need the high costs of an LP or GP.

#3 Refinance - I would need more detail and information about the overall plan to properly advise on this.
 

Matt Crowley

Senior Forum Member
REIN Member
Hello, I have a question regarding the structuring of a home loan for a rental and who would claim the gains/losses. My brother has a lot of money saved up but not so great credit so I would be the primary of the loan and he would be the co-signer is what the bank has told me we could do. We would both be on the deed and he would pay for 100% of the home's expenses, essentially all the responsibility of the home would be his. Do I need to have a partnership set up as an LP and GP, I would prefer to stay away from that if possible due to the obvious additional costs but if that’s how it needs to be done then so be it and then how would the sale of that look once he is able to refinance the property into his name only?
To me: this isn't joint venture or a LP / GP. This is a loan.

Have him register the loan on title. No reason that a loan agreement can't have equity kickers, ect. But his equity should have security.
 

Thomas Beyer

Senior Forum Member
REIN Member
To me: this isn't joint venture or a LP / GP. This is a loan.

Have him register the loan on title. No reason that a loan agreement can't have equity kickers, ect. But his equity should have security.


If your brother is on title with you then he is protected.

You may wish to define though what happens if
A) you decide to move out
B) he wants to sell but you don’t
C) you want to sell but he doesn’t
D) you fail to pay rent
E) you move out and it is re-rented and tenant doesn’t pay rent, or generally who manages day to day affairs of this now rental property
F) there’s a sizeable cash need for a major (or even minor) repair


Thomas Beyer, Asset Manager & Improver, Hard Asset Investor & DeFi Asset Hodler, Author, Father, Mentor, Hiker, Kayaker www.prestprop.com
 
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