How to structure a 50/50 partnership live-in duplex

Question

Hello,

I am new to BiggerPockets and am looking to get started in real estate investing when I move to Kansas City to start work. My friend and I had an idea to purchase a duplex together, live in one side, and rent out the other side. My question is how to best structure this type of arrangement. We should have enough cash for about a 30% down payment, but we will need a loan for the remaining amount. I know there are complications with loaning to an LLC, so is a partnership the correct structure? Are there any other considerations that need to be taken into account for obtaining the financing and tax structure of the business?

Gordon Cuffe · Answer

You will not be able to take out a conventional loan as a llc. This is a simple transaction. You both can take out the loan to purchase the property. You will be 50/50 owners. Write a simple one page agreement stating that you are 50/50 responsible for repairs and mortgage payments. You might also consider each buying your own duplexes as you do not need 30% down for owner occupied duplex loans.

Dan Krupa · Answer

@Alex Poage, @Gordon Cuffe is spot on. This doesn't need to be complex. You could technically do a commercial loan and they would lend to the LLC. However, that is typically structured at 6% for 5 years fixed, then 20% adjustable with a 20% downpayment. That doesn't make sense since you are living in it.

As Gordon mentioned, take advantage of living there. Use the FHA, put 3% down and purchase the duplex yourself.  Have him purchase a duplex also.  There are pros and cons to partnering.(think of it like a marriage)  You have a lot of great options available to you.

Best of luck to you.