Qualifying for FHA on Duplex While Still Sharing Equity

2 Replies

So myself and my business partner are looking to take advantage of the low capital requirement of an FHA loan on a duplex. I plan on applying and if granted the loan I also plan on living in one of the units for atleast a year. My partner is putting up half the down payment and our goal is to split equity. What is a legal way for both of us to benefit from the ROE while still getting the mortgage in my name for the FHA? (He already used his on a home). My initial thought is transferring to llc but I've heard of "due on sale" clauses presenting an obstacle.

@Kyle Nardon , can you give more insight on you and your business partner's arrangement/plan. Do both of you actively manage properties together? Is one person committing all the money to the investments up front?

Without more information, I'll just throw out an idea. Have your partner lend you the money as a 2nd mortgage on the home at a healthy interest rate.

One of the reasons I like this idea is that your partner doesn't have an ownership interest in the home you live in. If the partnership goes south, you don't want to have to sell your home and potentially move. Its also simple, because the partner is committing money only and expecting a predetermined return.

I would likely manage this property myself. Our goal is to equally benefit in the equity return and tackle more properties in the future. This would be our first actively managed property. I have thought about the idea you mentioned and have considered the risk of dissolution of the partnership but for our arrangement this seems like the better path.  

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