Questions regarding getting started
Hey All,
Past few months I've been trying to absorb as much information as possible to get started to the point of paralysis. There so much information now available and it's both overwhelming and confusing. If I was pursing this myself it would be much simpler but my first purchase will be a joint-effort with two other friends. So I'm looking for some guidance from the bigger pocket community.
Basically it's myself and two other people who are pooling money for a down payment on a single family home out of state. ( I know this brings up a whole bunch of questions as to why am I not doing a Multi instead, why is it out of state, etc., but we wanted to start with a SFH to get started and understand all the moving pieces before moving on to another property.)
Where I'm getting caught up is the complexity of working with other people on this deal. We've already started drafting a partnership agreement and will have a lawyer look over it just so everyone is on the same page. However, it's everything there after that I get really confused about.
I first looked at a LLC so that it can own the property, accept payments and taxes obligations would be clearer. However, I was told that banks would either not approve a loan to a newly formed LLC or that the rates would be much higher. Additionally, moving a personal mortgage loan to the LLC would trigger a clause that would require me to pay off the loan. So I read somewhere, that I should form the LLC much later on instead.
So now if one of us takes out the mortgage loan, purchases the house, and all transactions go through him. How would we handle rent income, taxes, tax benefits? If the rent is collected under one person for the time being, he'll be responsible for the taxes on that income and how does that translate to the rest of the partners.
Or is the answer to make the deals work within a LLC and try to find a bank that would approve a loan. Or am I over-complicating everything? This is will be our first real estate investment property and I want to make sure I am well informed of all the details so that we don't have any surprises later on, but the more I read the more confused I get. Hopefully there are folks here who've been in the same situation who could provide some guidance in which direction is best.
Thanks!