FHA Loan & Partnership

[Kyle Lancuski]

I and two other partners (very good friends of mine) want to be Financially Free. Last 6 mouths we have been educating ourselves w/ real estate and building our capital. We are all putting equal cash into the deals and will share equal responsibilities of the business making us 33.3333% partners for equity+cash flow. Our strategy Is to use a FHA loan 3x in one year. Ideal every 4 months finding a new MFH (that generates A/B return for house hacking for the year) with huge upside return on the following year & rotate putting the mortgage in the next partners name and (hopefully) put the other two on the title.

Concerns & Questions...

Does the FHA Loan have Restriction against putting people on the Title and not the mortgage?

If so, is there a way around making this strategy work?

Meaning...

Such as being silent partners & gifting the closing and down payment?

And if that’s possible..

Any suggestions how we could form a legal partner agreement that would give us equal equity to home and cash flow?

Cheers,

Kyle

[Don Konipol]

@Kyle Lancuski

Sometimes there are good reasons to do partnerships, division of labor, complementary skill sets, increased capitalization.

As I understand it, you are proposing that each of you buy a residential property as an owner occupant utilizing an FHA loan, live in the property as an owner occupant for a year, and then move out renting out the previously occupied unit? Further, you will each own 33.3% of each property? But only one of you will be the borrower on each property?

If the above is correct, here's the problem. The buyer of the property must also be the borrower. So, the only way to have all three of you on title would be for the borrower/buyer to transfer 2/3 ownership after the deal is closed. However, this transfer violates the due on sale clause and the FHA can accelerate the note. Further, it would seem that your plan may have some components of mortgage fraud, although I'm sure that's not your intent.

But back to good reasons and bad reasons for partnerships. I already mentioned some good reasons. Here are two bad reasons, (1) you’re scared or unsure and doing it with other people seems easier (2) you think it will be “more fun” with friends.

Truth be told, investing is not a team sport.