Question - Friends Buying an Investment Property Together

[Adam Michalak]

Dear all,

My friend and I are looking to buy an investment property together that neither of us will live in. Because this is the first property we are purchasing we are not going to form an LLC yet. We will sign a TIC agreement with a solid buy-out clause and exit clause. Our question is specifically, how will financing look for this property?

To be clear the type of property we are planning on buying is a single family detached 3b/2ba for ~100K. 

Is there anyone with experience buying a property with a partner outside of a LLC that can speak to this? Specifically anyone who has purchased a property with a friend with a Tenants in Common agreement for the mortgage and title of the home. Any and all pointers are welcome! Thank you in advance for your response!

Kind regards,

Adam

[Gina Kim]

Hi Adam,

It shouldn't look too different than if only one of you were purchasing it. You and your friend should both be able to be on the loan and title. They will take a combined look at your income and debt ratios, and will take the lower middle FICO between the two of you. In some instances (with a lot of mutual trust), I've seen partners where one partner will finance one property solely in their name, and another partner will finance a second property solely in their name. The reason for this is because for most conventional lenders, 10 finances properties will be the limit, and splitting up the mortgage between both of you would allow you in theory to purchase twice the number of properties. I'd only recommend that if there is mutual trust and a solid agreement between the two of you.

If you'd like any help with financing, feel free to message me directly.

Best Regards,

Gina