Splitting profits with partner

4 Replies

My buddy and I looked at a property about two months ago. He was unable to obtain financing, so the P&S agreement was written in my personal name only. I planned on adding him to the deed shortly after closing, so as not to complicate the process. The plan was for him to pay 50% of all costs needed at closing. After closing on the property yesterday, I was told that in order to add him on the deed, there would be a significant transfer tax, as we are not related. I was unaware of this, as I had previously added my wife to some of my properties in the past at no cost. Looking for advice on how to go about adding him on the deed while hopefully avoiding a transfer tax. Are we better off leaving the deed in my name only and splitting profits 50/50%. Any help would be greatly appreciated.

Hmm...what about putting it in an LLC and becoming 50/50 owners? Is there still a transfer tax ?

Of course, you run the risk of triggering the infamous due on sale clause, assuming you had to get financing. 

Filipe Pereira, Real Estate Agent in MA (#9557050) and CT (#0807610)
(860) 990-9103

Has the deed been recorded yet? It may not be too late to fix this. You can be the borrower and there can be additional owners on title -- just need lender approval and some ink on paper.

@Mark S. There is more than one option. @Tom Gimer has a great point, the title company may not have recorded the deed yet and may be able to change it. However any change could cause the lender to impose the "Due on Sale clause." That would include moving it to an LLC.

The may be an reception, like in MD that you can deed your property to a LLC that you own without transfer taxes. You could later add your friend to the LLC.

You could create an LLC or partnership agreement, where you keep title to the property, but are contractually obligated to split profits as the two of you see fit.

Originally posted by @Ned Carey :

@Mark S. There is more than one option. @Tom Gimer has a great point, the title company may not have recorded the deed yet and may be able to change it. However any change could cause the lender to impose the "Due on Sale clause." That would include moving it to an LLC.

The may be an reception, like in MD that you can deed your property to a LLC that you own without transfer taxes. You could later add your friend to the LLC.

You could create an LLC or partnership agreement, where you keep title to the property, but are contractually obligated to split profits as the two of you see fit.

I was thinking get lender approval and add partner to the deed and deed of trust before recording. All it would take is to quickly run judgments on partner and change page 1 of the deed and page 1 and signature page of the deed of trust. The smaller the lender, the better the odds of a "yes".

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