All Forum Posts by: Andrew Jervis

@John Matthews Thanks John, very useful information. The tax implication I was thinking of was that no member of the partner would be able to deduct interest, although perhaps the same deduction could be taken at the LLC level as an expense that eventually flows through to each partner? Aside from the taxes though the loan difficulty is also a major hurdle if we were to use an LLC, especially with our lack of experience. Perhaps an LLC would be better, but I want to understand the options if an LLC were not used as well so that all the information is on the table. We do plan on speaking with a lawyer, and the more advice we get the more we are realizing that should be done sooner rather than later.

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?

@Natalia Latsios I'd be interested in hearing about some of the properties you have available. Please message me

Andrew

Thanks everyone, this is all extremely useful. I have called up a portfolio lender/small bank and they said I shouldn't have any problem getting down to 15%, which is a step in the right direction and provides me a lot more flexibility. I'll have to do more research around BP especially for some of the strategies @Ram Srinivasan mentioned. I figured 20% wasn't a hard line and there are ways around it, but this is a huge time saver so thanks again.

For anyone reading, when I called the small bank on Friday they said that for a person with excellent credit the difference for a 30 yr loan in putting 20% vs 15% was only 4.625% vs 4.7%...so the spread does not seem bad at all. Definitely worth a call for anyone that might be in the same position as me

Does anyone know of a way of putting less than 20% down on a property(most likely MFH) in which I will not be an owner occupant? 

I know the obvious solution would be to be an owner occupant, but for this discussion let's assume that's out of the question. I have around 25k in savings I can put down, so while I may be able to find something under $125k, it severely limits me in my area. 

Welcome! I am also new to the BP community and looking to invest in the same counties as you. 

Welcome! Also a newbie from philly. 

@Ariel O. @Greg Gallucci thanks...I haven't used either of these before and both seem very helpful. 

Does anyone have any suggestions for websites or other online resources that are good in determining rent estimates in different areas? 

I want to develop my own analysis of expected rent as opposed to what MLS listings have. I use craigslist and city data as a baseline but want to make sure i'm not missing out any great resources.

Also, any other can't miss general REI online resources I should be taking advantage of?

@Chris Martin @Robert Curls@Richard C.

Thanks all, I appreciate the information.  Your responses are kind of what I was afraid of. It seems like the investors I spoke with take the owner occupation too casually.  It's conversations like these that can save me from a big headache(or worse) down the road. 

It's pretty clear that I should not be trying to obtain owner occupation financing unless I change my living plans. Thanks again.