Real Estate Partnership with "Silent" Family Member - Taxes
Hello All,
There are a number of posts about partnerships, but few discuss the nuances of tax implications, especially when one party is primarily interested in this investment for the tax incentives. Would appreciate hearing from you!
The situation:
A family member would like to be a silent partner and supply the equity for a buy-and-hold deal. They are looking to diversify their investment portfolio and benefit from tax advantage of real estate.
1st Question) From your experience, is the tax benefit taken on annual cash flow more valuable than the potential for capital appreciation through leverage. Reason this seems important is that it would help determine strategy of a larger vs. smaller downpayment to increase cash flow or increase leverage.
2nd Question) I've read about "special allocation" of taxes that allows for the tax gains/losses to be distributed in a manner that is not equal to the ownership stake. If we are an LLC with 50/50 share of equity and cash flow, can the silent partner take a 75/25 cut of the tax gain/loss?
3rd Question) Seems that many banks will not lend to an LLC, especially a newly formed one. If the silent partner puts the mortgage under their name, can they claim a larger tax gain/loss than myself?
4th Question) General question about partnerships - What have you found is a fair division of equity/profits/losses? I've heard many people suggest that if the silent partner brings in all the equity, then a 50/50 split with the general partner would be fair to compensate for finding the deal and managing the property.
Thanks for your input!