First property and personal loan

[Jamie Brayton]

My husband and I have been diligently studying in order to buy our first single-family rental home and were hoping to close on our first property in 2017. My well-intentioned father-in-law (a long time investor and developer) scooped up a foreclosure at a great price ($60,000) and plans to roll this property over to us via a personal loan. We’ve talked to a real estate attorney and accountant well versed in investment properties, but we still feel a little stumped about how to proceed with the fewest unfavorable implications. Here are some details about the transaction:

-My FIL offered all cash in his name only.

-We are currently creating an LLC.Our attorney suggests including my FIL in the LLC and then having him pull out later. I think this will make this a partnership for the time being? This isn’t the goal. He would like to be free of the property completely.

-Our attorney would draft a loan document between the three of us.

I suppose my questions are:

-What am I not considering?

-What tax/financial implications will this have?

-Must we be a partnership?

-Will this arrangement hurt our chances of getting a bank mortgage in the future? We have our eye on equally complicated second property that would require us to get some financing or large amount of cash fast.