Investment Property with partner.

My brother in law and I want to buy an investment property. Do we need to form a formal partnership to do this?Also, he does not want to lose his first time home buyer status. Is there a way to purchase a property with him so that he retains that status.Lastly, I am a sole prop of a business. Am I able to buy the property with my business and still have my brother in law involved.What would we need to do to make this happen?

Asked on May 19, 2009 under Real Estate Law, California

Answers:

J.M.A., Member in Good Standing of the Connecticut Bar / FreeAdvice Contributing Attorney

Answered 11 years ago | Contributor

Here is what you need to do:

You want to form a limited liability company with both you and your brother in law as 50-50 members (i.e. you each own 1/2 of the company).  The mortgage company will require a personal guaratee on the loan (i.e. personally liable if the LLC fails to pay the mortgage).  If you are able to qualify for the loan without needing your brother in law to also sign a guarantee, then the LLC be the borrower and you will be the co-signor/guarantor and your brother in law will not have any record of taking out a loan where it will affect his first time home buyer status.  I would keep your business separate from the LLC so that god forbid the property is not a success, the bank cannot come after your personal business.  I would also put your sole prop business in an LLC so that you limit exposure there too.  I suggest that you have a lawyer help setting up these entities and doing the real estate purchase.  Good luck!


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