Structuring a first deal

5 Replies

Details- he has a property appraised at $356k. He wants to refinance and take out 90% to put down on another house. He has it rented out now on a 2 yr contract. 2 months into the contract. After the refinance with rent coming in he would be making $300 a month. 

We’ve talked about doing smaller deals but he wants me in on this. I just purchased a house and I don’t think I could get approved on a new loan with him. He is active duty military and my get stationed out east. We are in the Denver market. 

Is there a way to get involved with him on the loan by him self, and me as a business partner. Or is this just not a good deal for me to start on? 

Matt,

He’s refinancing for $330k and the way we wanted to structure the deal is I take over the management side in the case that something happens and he deploys or has to move for the military. If we ever decide to sell the property, as of now it’s value is $356k and I don’t have to pay the difference but he gets that on the sale and if it increases we split the difference. And from this point on we split the cost of repairs, ext....

If we lose money on the sale or if we keep it and rent at a loss in the future then I would have to pay half. 

He wants to refinance with me on the loan, he is already approved for the full amount.  I don’t think I’ll be able to get approved to split the loan with him. I have $16k saved but I wouldn’t need to put any money in. 

Moving forward if he puts it in his name alone, is it safe for me to get on this or not? And how would I structure that contract? 

My experience is in construction for 20 yrs and working with contractors. 

Thank you for any advice

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Originally posted by @Tyler Underdahl:

Matt,

He’s refinancing for $330k and the way we wanted to structure the deal is I take over the management side in the case that something happens and he deploys or has to move for the military. If we ever decide to sell the property, as of now it’s value is $356k and I don’t have to pay the difference but he gets that on the sale and if it increases we split the difference. And from this point on we split the cost of repairs, ext....

If we lose money on the sale or if we keep it and rent at a loss in the future then I would have to pay half. 

He wants to refinance with me on the loan, he is already approved for the full amount.  I don’t think I’ll be able to get approved to split the loan with him. I have $16k saved but I wouldn’t need to put any money in. 

Moving forward if he puts it in his name alone, is it safe for me to get on this or not? And how would I structure that contract? 

My experience is in construction for 20 yrs and working with contractors. 

Thank you for any advice

Consider forming a LLC or a LLP to protect yourself from your partner financially. This way you will not be responsible for your partner's malpractice or irresponsibility. The contract should be under the LLC or LLP.

Hey Jay, if we work under an LLC and he is the only one on the deed, will that give me any trouble when we sell? Assuming we have a contract written out with all the details we both should be good?? The idea is to rent and build up enough to eventually buy another one together. We talked about doing a partnership under an LLC going forward.