Singapore, Singapore · Member since 2013 · 19 posts · 1 vote
Quick question about investing with a partner...
If we avoid forming an LLC or S-Corp for the first few deals, to perserve access to conventional financing, will the bank look at both of our assets or do we have to just choose one person for each mortgage?
Assume that we've worked out the terms of our partnership in writing (this question isn't really about that - understand the downsides, risk and liability issues). We plan to form a corporation once our options for conventional financing dry up and we'll move the titles over to those when the time is right.
Question is: if we're each putting up 50% of the money, how will the bank view that under conventional financing for a non owner occupied 2-4 family.
I "believe" the conventional lender will underwrite the loan based on both your incomes, credit, and cash reserves together. I don't think it's required that you have a partnership formed. I don't even think they care about who pays what % of the down payment. Basically it gets treated just like a married couple both putting their names on the loan app.
I do not have personal experience with this yet, but I have never read any guidelines or heard of any situation where they would handle it differently.
I did this with my business partner on our first home and in my opinion it's a huge mistake. First, it ties up both names on a single house. In other words if you could each qualify for 10 conventional loans (20 total) but put both names on each investment then you are limited to 10 mortgages total. Second, if you ever want to refi you both need to provide financials, taxes, pay stubs, etc. and it's a hassle. I would have an iron clad partnership agreement and take turns obtaining mortgages.