Offering your property's depreciation to a private investor

[Pete Edmonson]

Hi all, 

Wondering if anybody offers up the depreciation from a potential new property to a private investor as part of the terms? I have a couple of investors that are looking to a.) park some money, and b.) find additional tax write-offs. For example, on a standard $100k SFH, with the 20% down payment coming from the investor, and a standard $80k bank loan, I am offering the investor either 50/50 split or 100% depreciation for the property, which allows me to get the property with zero-down, and allows the investor the tax write-offs they want. End game would either be for me to refi in 12 months to cash investor out and them repeat, or let it ride until the investor wants out.

[Linda Weygant]

This is definitely something you can do via the Operating Agreement or Partnership Agreement of the LLC/partner/entity. You can specify something like "all income and expenses are to be split in a pro-rata fashion according to ownership percentages, except for depreciation which shall be split as follows".

Then write up how you want that split.  You can also specify things like:  "Equity in the property due to mortgage paydown will go to X partner while equity in the property due to market fluctuation will go to Y partner"

Essentially, you can split income, deductions and gains in any manner you like, so long as you are cognizant of legal issues like usury laws, foreign taxation, etc.