All Forum Posts by: Keith Montgomery

Thank you for all your input and questions to consider regarding this partnership, many of which we have ironed out. For example, the property would just be titled in my wife's and my name.  The family member is my mother in law who is a foreign national and cannot qualify for a US loan, and full cash investments are obviously not the best for properties.  Since I have excellent credit and stable income to qualify for loans it is mutually beneficial for both parties.  As I previously stated, Mother in law wants to be completely hands off in every way,(title will be in wife and my name only).  My wife and her mother have had other non property business arrangements in the past that have gone well.

We are deciding between 50/50 or 75(wife and I)/25 (mother in law) split for all expenditures, profits, taxes, and long term appreciation.  I am leaning toward a 75/25 split as we are doing all of the work.

I would like to get some advice on setting up equitable terms of a partnership, which I have never ventured into before. I read through several forums, but could not find exact same scenario which is not surprising given multitude of permutations. Finally, I realize, there is no set standard and a partnership is what we make it. I own a few rental properties solo, so not totally new to the real estate world, with all those disclaimers…

A close family member is allowing my wife and I to invest a considerable amount of money in real estate. They will be hands off from beginning to end: finding property, making offers, oversight, one day selling. My wife and I will carry the conventional loan (75%), family member will contribute the entire down payment (25%) on properties we purchase. Buy and hold strategy. We will hire a property management company if the property is out of state. We will be responsible for all long-term oversight.

Any advice on appropriate division of expenses/profits/appreciation for this partnership? Should we be solely responsible for loan interest? I know if we every sell the property family member would recoup initial cash investment in property. Thank you in advance and please let me know if I missing important information for you to provide an informed opinion.

So I thought I would get advice on this specific situation that I had not previously considered. I live in San Diego, CA suburb called San Carlos. I am buying a new home in San Diego and the mortgage broker suggested instead of selling my current home I could refinance and, pull out money, and rent it out (I don't need to sell current home for down payment of new house) I would manage it myself. It is a SFH 1,700 sq/ft 3bed,2bath updated, owned solar, great neighborhood and school district

Currently

Mortgage $2,800 (P,I,tax, insurance)

Purchased at $545,000 in 2013

Loan balance $425,000

Home value $750,000 estimated

Rate 3.25%, 30 year fixed

Sale $280,000 profit est after fees, fixes, closing, etc, I have lived in it for several years so profit would be tax free

Assuming again a $750,000 appraised value

Refinance rate 3%

Refinance cost $3000

Pull out about $200,000

New Loan for $625,000

New Mortgage 3,300 month

I could rent it out for around $3200-$3300 estimated, I would manage it myself

Options

1) Sell

2) Rent

3) Refinance with cash out and rent

It seems like a good idea to refinance and rent, if I did sell, I would invest in other properties like multifamily properties with better ROI. I realize this is an appreciation property not a high ROI property. Thinking of investing in Saint Louis where I was born and raised and know the area. Hopefully I included enough information to give an informed opinion. If not please let me know what information I am neglecting. Just wantt to make sure I am not missing something on such an expensive decision. Thanks in advance for the advice!