Partnership Financing

[Andrew Jervis]

Hello All,

I have recently teamed up with two other people to form a partnership pursuing MFH in the Philadelphia area. Originally, we thought it would be best to form an LLC, but after consulting with a few local investors, it was suggested that at our level an LLC (mostly due to tax reasons) may not be the best option. Assuming we will not be operating under an LLC at first, what type of financing options to do we have?

One option would be to take the mortgage under one of our names, while the deed would be under all 3, but that has obvious complications. For one, if we were to pool our money into one person's account wouldn't we be subject to a gift tax? And while we all trust each other, I'm not sure all of us would be completely comfortable giving away our life savings into another's account. Plus with only one of us on the mortgage, only that person has liability towards the mortgage, while on the flip side, only that person can take the deductions on their taxes.

Another option, I believe, would be to have all three of us on the mortgage, but I am not entirely sure what that effect that would have on rate, down payment requirement, and how complicated that would get with actually obtaining a loan. 

What does the BP community suggest is the best route to obtain financing for a three person partnership that does not choose to form an LLC?