Options for Partner Investing

6 Replies

Hi, I'm a new member in the NYC area looking to gain insight on how to structure my first purchase with a friend/investor.

I've heard the pros and cons for LLC's, being that they provide limited liability and pass-through taxation, but when owned by multiple parties still has to file a tax return and will often get much higher mortgage rates if any lenders will even lend to them. Not to mention the fees to incorporate, file, and maintain. Would co-signing the mortgage and getting an umbrella insurance policy, and simply having a real estate attorney write up an enforceable contract be better? Or would we lose out on tax savings if we structure this way? Are LLP's and S-Corps not even worth looking further into? Is there another method we've overlooked? Like each of us incorporating separately and creating a Joint Venture on a property? We want to go in 50/50 on an out-of-state property that is TBD for our first investment (probably not our last together), but haven't been able to find quality information on all the intricacies for every different option. Any help, advice, or suggested reading is welcome. Thanks in advance!

You will both sign off on the mortgage and that will be binding, as well as both your names being on the deed.

As for the other contract, that’s a question for your lawyer. I would think a contract written up by a lawyer and signed by both parties would certainly be an enforceable contract. Your lawyer can tell you if it needs to be notarized or something of that sort.

Originally posted by @Dillon Scott :

Hi, I'm a new member in the NYC area looking to gain insight on how to structure my first purchase with a friend/investor.

I've heard the pros and cons for LLC's, being that they provide limited liability and pass-through taxation, but when owned by multiple parties still has to file a tax return and will often get much higher mortgage rates if any lenders will even lend to them. Not to mention the fees to incorporate, file, and maintain. Would co-signing the mortgage and getting an umbrella insurance policy, and simply having a real estate attorney write up an enforceable contract be better? Or would we lose out on tax savings if we structure this way? Are LLP's and S-Corps not even worth looking further into? Is there another method we've overlooked? Like each of us incorporating separately and creating a Joint Venture on a property? We want to go in 50/50 on an out-of-state property that is TBD for our first investment (probably not our last together), but haven't been able to find quality information on all the intricacies for every different option. Any help, advice, or suggested reading is welcome. Thanks in advance!

 Welcome aboard Dillon.

When you become 50/50 on the deed look into if you want to be tenant's in common or have joint tenancy. In joint tenancy upon death of one of the partners the surviving partner would retain 100% ownership. In tenants in common the deceased's ownership will be transferred to their heirs. Morbid, but important to think about if you put the property in your personal names. 

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