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Hey there,
I got a perfect NYC real estate deal: no competitor, no bid war, discount price: the beautiful multi-family brownstone (4 units) in which i live is for sale for 1.5M.

Since i know the landlady and his family for over ten years, i am given the priority to purchase, as well as a $200K discount - pretty much what i have been giving her in rent over 10 years. Each days numerous investors are knocking to buy the house, but she tells them that she already has a buyer, me! I even have the contract in hand. Also, renting 2 units is enough to cover the full mortgage. The thing is, i am an artist, and besides my excellent credit score, my bank broker who loves my project and about $25K for down payment, my income is not regular enough to get a mortgage by myself: i have no other option than some sort of...partnership (ouch, i said it!).

The potential partner (and her husband) i m talking with these days has much money - they have about $300K for downpayment and steady high income as art designers. For the past 3 years, she got outbidded each time she made an offer on any house in my neighborhood, so she knows the value of my deal. Since a LLC is expensive, here s what she suggest: they (she and her husband) buy the house under their name (to get a better rate..) and give me a purchase option. In the end, we both pay our half of the mortgage and end up co-owner.

How does this sound to you?
I m concerned about what could go wrong for me if my name is not on the title from day one.
How much is worth me bringing and securing the deal?
What is the "value" of this in a partnership?
How should we split the co-owner ship (she brings the front-money and i bring the deal): 50/50 ?
I ve read a lot of horror stories about buying with friends: I dont know her very well, though she s a friend of a friend, and we plan to put all of this in contract: has anybody heard of something like that before? Main pitfalls?
Is she trying to abuse the situation?

Thank you for sharing any thoughts on this.

Member Summary
Most Recent Posts
This is a train wreck. OP seems to think that her "partners" can buy this building and that she can keep paying rent an... (more)

dcwilbur (Jan. 11, 2013 @ 11:55a) |

He doesn't have 500k, he's an "artist" and I highly doubt he even has a lawyer on retainer, more likely he tried to get ... (more)

technolich (Jan. 11, 2013 @ 12:42p) |

OK, so the current owner inherited a property maybe worth $1.7 from her parents. Her parents put a reverse mortgage on ... (more)

gasaver (Jan. 14, 2013 @ 6:35p) |


An llc isn't expensive.

You should have a lawyer representing you (and only you) to ensure you aren't getting hosed.

An LLC is not expensive in itself granted, but the 20% (minimum) down and interest rate that goes with it is expensive (like 6% instead of 3.3%).

Yes i have an attorney: so far he told me "well, if you put no money down and end up with even 40% ownership, that s not a bad deal".
My point is that i intend to pay my half of the mortgage, so even if i barely participate much to the 20% down payment, i should at least be co-owner 50/50 no? Plus this makes me renounce to any "first time home buyer" s advantage (since partner already bought).

French?

Huge potential for messiness.

What if the couple you are partnering with gets divorced? A messy divorce could hurt you deeply.

What if your partner dies and their share of the property gets split among 16 different beneficiaries?

Just realize that if you go though with this deal, not only are you contending with the inherent risk of the real estate market, but you have the added risk of betting on the stability of partners you hardly know.

Hublot said:   

here s what she suggest: they (she and her husband) buy the house under their name (to get a better rate..) and give me a purchase option. In the end, we both pay our half of the mortgage and end up co-owner.

How does this sound to you?
I m concerned about what could go wrong for me if my name is not on the title from day one.
.

Depends how the purchase option is worded . Most purchase options simply give you right to buy it at same terms buyer is paying - if a buyer comes by with $2m how are you going to come up with it?

Essential to have an attorney review any purchase option. I'd want to be on title from day 1, there are lenders who will put the loan in their name only but allow You on title as well.

I'm not familiar with NYC real estate but is it possible to subdivide or sell off individual units of the building ? Or must it be sold as a whole? I'd want to be able to stay in my unit even if the others are sold

oui?

I would be interest to hear how this turns out, as I am considering doing a similar thing but with a family member. Can't qualify for the mortgage but could easily pay the mortgage... Let us know what happens. I think the most important is to get a real good lawyer and think about everything.
getting 50/50 might be alittle much in my opinion, though you need to think about the fact that you do bring a downpayment. You bring the $200k that your landlady is giving you as a rental discount. So i would work the deal based on that, personally. Your down payment is the $200k discount...

The other partners are not going to treat his discount as his downpay ment


Op if this friend of a friend does not give you attractive terms. , let me know. I might know investors who can make you a better deal

Question: are your sure your income is not enough? Because in a live in investment property, 75% of the rental income is counted as your income. (if it is rented already)

may I ask where this is in NYC? I'm always looking as well. I know in SF they have things called TICs being from NYC never heard of them -- but can you structure it that way?

What is your intended goal? Do you want to own this place outright eventually, or are you happy with a split investment down the line? Do you want the power to sell the property down the road?

I think that as long as you get a (real) contract which states all the terms then you will be safe. For instance, perhaps they are putting more down, but you have the option to pay off a larger percentage of ownership over the next 10 years and perhaps buy it outright from them (if that's what you want). And perhaps they get free rent (if they are wanting to live there) on a unit, and/or rent stabilization if you eventually own the place outright. Another poster brought up a good point of divorce - so perhaps you should discuss what happens if there is something of that magnitude. One such clause can be no selling unless all parties agree (may be bad for you too though, depending...).

The short of it is, all sorts of things can go wrong when you aren't 100% in control (and sometimes even when you are). Discuss with your friends what you are both hoping to get out of it and draw up a contract with an attorney to meet those needs. Just be sure that nothing in the contract can't be superseded by local real estate laws.

Hublot said:   Hey there,
I got a perfect NYC real estate deal: no competitor, no bid war, discount price: the beautiful multi-family brownstone (4 units) in which i live is for sale for 1.5M.

Since i know the landlady and his family for over ten years, i am given the priority to purchase, as well as a $200K discount - pretty much what i have been giving her in rent over 10 years. Each days numerous investors are knocking to buy the house, but she tells them that she already has a buyer, me! I even have the contract in hand. Also, renting 2 units is enough to cover the full mortgage. The thing is, i am an artist, and besides my excellent credit score, my bank broker who loves my project and about $25K for down payment, my income is not regular enough to get a mortgage by myself: i have no other option than some sort of...partnership (ouch, i said it!).

The potential partner (and her husband) i m talking with these days has much money - they have about $300K for downpayment and steady high income as art designers. For the past 3 years, she got outbidded each time she made an offer on any house in my neighborhood, so she knows the value of my deal. Since a LLC is expensive, here s what she suggest: they (she and her husband) buy the house under their name (to get a better rate..) and give me a purchase option. In the end, we both pay our half of the mortgage and end up co-owner.

How does this sound to you?
I m concerned about what could go wrong for me if my name is not on the title from day one.
How much is worth me bringing and securing the deal?
What is the "value" of this in a partnership?
How should we split the co-owner ship (she brings the front-money and i bring the deal): 50/50 ?
I ve read a lot of horror stories about buying with friends: I dont know her very well, though she s a friend of a friend, and we plan to put all of this in contract: has anybody heard of something like that before? Main pitfalls?
Is she trying to abuse the situation?

Thank you for sharing any thoughts on this.


I am in a similar predicament. I would like to buy real estate but also don't have the income to show for it nor the tax returns yet rental income on the properties I want to acquire would turn them cash positive.

The problem is the process is corrupt in this nation and I believe the very premise of the bank requiring a mortgage with income to show is completely unfair especially for rentals when the income will be generated by the rental tenants.

Before 2008 Rental properties were a lot easier to acquire but with the new policies taken by this government, it has gone against the citizenry and the people who actually wound up changing the policies were actually corrupt themselves in taking out loans that other people would never have gotten on favorable deals.

Businesses are failing left and right and the real estate market has been really bad for buyers. However if you were left rental properties due to inheritance and so on, they will still bring significant rental income.

The system is locked out for the rest of us and there is no way to make it work. Other nations may have better laws and flexibility in acquiring properties so I believe it is best NOT to focus on the USA right now but instead invest in other nations where one can actually generate income and pay a lower tax burden on such investments with easier acquisition policies.

So I will skip NYC altogether unless you have all cash to make the deal work. The USA is a good market IF you have all cash and buy properties that are undervalued that the bank or owners want to liquidate fast which are below market price.

But for an investor like me, nothing I can do can make the real estate system work in this nation without getting abused by someone else in the process really hard. This includes hard money lenders or other shady business partners and deals which are not conducive to generating wealth on real estate.

I hate the USA right now and the policies in place for the business climate and real estate markets and so on and so forth. The system here is massively broken.

grex23 said:   Hublot said:   Hey there,
I got a perfect NYC real estate deal: no competitor, no bid war, discount price: the beautiful multi-family brownstone (4 units) in which i live is for sale for 1.5M.

Since i know the landlady and his family for over ten years, i am given the priority to purchase, as well as a $200K discount - pretty much what i have been giving her in rent over 10 years. Each days numerous investors are knocking to buy the house, but she tells them that she already has a buyer, me! I even have the contract in hand. Also, renting 2 units is enough to cover the full mortgage. The thing is, i am an artist, and besides my excellent credit score, my bank broker who loves my project and about $25K for down payment, my income is not regular enough to get a mortgage by myself: i have no other option than some sort of...partnership (ouch, i said it!).

The potential partner (and her husband) i m talking with these days has much money - they have about $300K for downpayment and steady high income as art designers. For the past 3 years, she got outbidded each time she made an offer on any house in my neighborhood, so she knows the value of my deal. Since a LLC is expensive, here s what she suggest: they (she and her husband) buy the house under their name (to get a better rate..) and give me a purchase option. In the end, we both pay our half of the mortgage and end up co-owner.

How does this sound to you?
I m concerned about what could go wrong for me if my name is not on the title from day one.
How much is worth me bringing and securing the deal?
What is the "value" of this in a partnership?
How should we split the co-owner ship (she brings the front-money and i bring the deal): 50/50 ?
I ve read a lot of horror stories about buying with friends: I dont know her very well, though she s a friend of a friend, and we plan to put all of this in contract: has anybody heard of something like that before? Main pitfalls?
Is she trying to abuse the situation?

Thank you for sharing any thoughts on this.


I am in a similar predicament. I would like to buy real estate but also don't have the income to show for it nor the tax returns yet rental income on the properties I want to acquire would turn them cash positive.

The problem is the process is corrupt in this nation and I believe the very premise of the bank requiring a mortgage with income to show is completely unfair especially for rentals when the income will be generated by the rental tenants.

Before 2008 Rental properties were a lot easier to acquire but with the new policies taken by this government, it has gone against the citizenry and the people who actually wound up changing the policies were actually corrupt themselves in taking out loans that other people would never have gotten on favorable deals.

Businesses are failing left and right and the real estate market has been really bad for buyers. However if you were left rental properties due to inheritance and so on, they will still bring significant rental income.

The system is locked out for the rest of us and there is no way to make it work. Other nations may have better laws and flexibility in acquiring properties so I believe it is best NOT to focus on the USA right now but instead invest in other nations where one can actually generate income and pay a lower tax burden on such investments with easier acquisition policies.

So I will skip NYC altogether unless you have all cash to make the deal work. The USA is a good market IF you have all cash and buy properties that are undervalued that the bank or owners want to liquidate fast which are below market price.

But for an investor like me, nothing I can do can make the real estate system work in this nation without getting abused by someone else in the process really hard. This includes hard money lenders or other shady business partners and deals which are not conducive to generating wealth on real estate.

I hate the USA right now and the policies in place for the business climate and real estate markets and so on and so forth. The system here is massively broken.


So, your complaint, to boil it down, is that banks won't lend against a building when, in the event that for some reason the rent on the building _won't_ cover the cost of servicing the mortgage, there's no other income flow to fall back on? That's not at all unreasonable, and it's certainly not an absolute. How much of a buffer are we talking about here? Is it a "it's CF positive, but if rents drop by 5%, or the furnace needs replacement, or one tenant doesn't pay, then it's not CF positive" scenario? Clearly, if you can buy a building with a $1MM annual rent roll and $200k in annual opex plus capex, you can get a mortgage on that building without a personal guarantee.

grex23 said:   I believe it is best NOT to focus on the USA right now but instead invest in other nations where one can actually generate income and pay a lower tax burden on such investments with easier acquisition policieshuh ? you will need even larger down payments in other countries

xoneinax said:   grex23 said:   I believe it is best NOT to focus on the USA right now but instead invest in other nations where one can actually generate income and pay a lower tax burden on such investments with easier acquisition policieshuh ? you will need even larger down payments in other countries

Depends on the specific nation. I never got into commercial or rental real estate before and yet from what I see in the USA is that they won't even give a small loan to acquire a small property.

I tried to acquire a foreclosure property to generate rental income but the mortgage firms would not allow me to use a corporation to acquire the property.

grex23 said:   
...I would like to buy real estate but also don't have the income to show for it...
...for an investor like me...


How you can call your self a investor if you do not have money to invest?

It's possible to be on the mortgage and deed without being on the note. Meaning that you can own a portion of the property without having your credit taken into account for the purpose of underwriting the loan. I might suggest looking into that. A good mortgage banker or mortgage broker can explain how it might work. Also, you absolutely must be represented by an attorney in a NYC real estate deal.

svap said:   grex23 said:   
...I would like to buy real estate but also don't have the income to show for it...
...for an investor like me...


How you can call your self a investor if you do not have money to invest?


Well he wants the property so that he can "make" money with it by renting it.

I fully support his position, we should give money to every tom,dick, and harry that wants to buy a house and flip it or rent it that walks in the door.

We don't need to require proof of income, we don't need assets, and who needs regulations!

Clearly buying houses in Africa,Syria, or China would be the smart play and New york real estate isn't even worth the paper it's printed on after Sandy!

I mean, clearly New York is just overvalued and people only want to live there so they can pay exorbitant rent.

I have a bridge I'd like to sell and I don't even own it yet, nor do I have the income to show in order to purchase it or get a loan, anyone want to buy?

Also those loan rates are ridiculous, no one ever defaults on loans so they should be at 0%

Greedy banks!

/really heavy dose of sarcasm...

OP: Have you asked the owner if she would consider doing a private mortgage with you?

technolich said:   svap said:   grex23 said:   
...I would like to buy real estate but also don't have the income to show for it...
...for an investor like me...


How you can call your self a investor if you do not have money to invest?


Well he wants the property so that he can "make" money with it by renting it.

I fully support his position, we should give money to every tom,dick, and harry that wants to buy a house and flip it or rent it that walks in the door.

We don't need to require proof of income, we don't need assets, and who needs regulations!

Clearly buying houses in Africa,Syria, or China would be the smart play and New york real estate isn't even worth the paper it's printed on after Sandy!

I mean, clearly New York is just overvalued and people only want to live there so they can pay exorbitant rent.

I have a bridge I'd like to sell and I don't even own it yet, nor do I have the income to show in order to purchase it or get a loan, anyone want to buy?

Also those loan rates are ridiculous, no one ever defaults on loans so they should be at 0%

Greedy banks!

/really heavy dose of sarcasm...


You just don't get it. The whole banking sector is utterly corrupted under the policies in place now.

Interest rates in savings accounts controlled by the federal reserve being pulled downward and manipulated via the central bank while people can't even acquire properties who were previously qualified to be able to get them pre the 2008 global financial crisis and new regulations imposed by congress which adversely affected the marketplace.

The regulations under Dodd-Frank and others which provide unnecessary regulatory burdens are disgusting.

Because of the policies in place, USA real estate is NOT the place one should invest because other global economies have much better real estate markets right now.

I think the real estate markets in Singapore, Hong Kong, New Zealand, Australia and Singapore are far superior than buying in the USA right now with a lot more room for growth.

Hublot said:   Since i know the landlady and his family for over ten years,
She-male, or dude looks like a lady?

this is what i have trouble with

"here s what she suggest: they (she and her husband) buy the house under their name (to get a better rate..) and give me a purchase option."

grex23 said:   I think the real estate markets in Singapore, Hong Kong, New Zealand, Australia and Singapore are far superior than buying in the USA right now with a lot more room for growth.
then why have you posted in at least 2 threads desperately trying to find ways to acquire US real estate???

stop threadjacking and get a job or something.

So you have irregular income and only $25k in savings, but you can afford half of the mortgage, taxes, insurance and maintenance on a $1.5 million dollar New York apartment building?

No way would I get involved in something like this without forming a legal entity around it and fully protecting my interests in the event of any imaginable circumstance.

dcwilbur said:   So you have irregular income and only $25k in savings, but you can afford half of the mortgage, taxes, insurance and maintenance on a $1.5 million dollar New York apartment building?

No way would I get involved in something like this without forming a legal entity around it and fully protecting my interests in the event of any imaginable circumstance.


My income is irregular but yet substantial. With a co-signer, i got approved for 1.2M initially.
The building is cash flowing so it pays for itself and more.

We re thinking about a legal entity, but cannot find any that fits so far - and LLC ask for too large a down payment..

After calculation, it seems that the whole deal would be a bit simpler and cheaper if THEY buy the house while giving me a Purchase option lease.
And this scenario would then make my name appear on the title - does someone here confirm that?

SuperET said:   this is what i have trouble with

"here s what she suggest: they (she and her husband) buy the house under their name (to get a better rate..) and give me a purchase option."


Interesting point: what kind of trouble do you think could potentially lie in there?

After calculation, it seems that the whole deal would be a bit simpler and cheaper if THEY buy the house while giving me a Purchase option lease.
And this scenario would then make my name appear on the title - does someone here confirm that?

Kanosh said:   OP: Have you asked the owner if she would consider doing a private mortgage with you?

The owner is very flexible with me from the start: offered to pay in one or 2 parts, but i would still have to come up with a first installment of 500K
But it seems the banks i talked too are not very happy with lending only half of the purchase price (who do they go after if borrower default while not exactly owning the entire house?)

Rathipon said:   It's possible to be on the mortgage and deed without being on the note. Meaning that you can own a portion of the property without having your credit taken into account for the purpose of underwriting the loan. I might suggest looking into that. A good mortgage banker or mortgage broker can explain how it might work. Also, you absolutely must be represented by an attorney in a NYC real estate deal.

Being on the mortgage and dead without being on the note, really? is this something you ve seen? i m definitely going to look into that.
Although i dont have a problem with the bank pulling out my credit since it s very good anyway.

RedCelicaGT said:   French?
Yup, you?

Hublot said:   dcwilbur said:   So you have irregular income and only $25k in savings, but you can afford half of the mortgage, taxes, insurance and maintenance on a $1.5 million dollar New York apartment building?

No way would I get involved in something like this without forming a legal entity around it and fully protecting my interests in the event of any imaginable circumstance.


My income is irregular but yet substantial. With a co-signer, i got approved for 1.2M initially.
The building is cash flowing so it pays for itself and more.

We re thinking about a legal entity, but cannot find any that fits so far - and LLC ask for too large a down payment..
That doesn't mean you got 1.2M, that means your Cosigner is worth 1.2m.
And LLC will protect you more than say, you and a friend bought it together, and now we are fighting.

Ask yourself

1. Why is she selling
2. How many units are empty
Too many empty units is bad, all full units is bad (Rent Control)
3. Is the building 100% Structurally sound?
Did you get a professional inspector?
4. She said she's got offers. That's what the guy who sold me a lemon car last year told me too.
5. Does the building have code issues?
6. Does selling the building pass all the lien's , judgements, lawsuits, to the new owner (You?)

grex23 said:   technolich said:   svap said:   grex23 said:   
...I would like to buy real estate but also don't have the income to show for it...
...for an investor like me...


How you can call your self a investor if you do not have money to invest?


Well he wants the property so that he can "make" money with it by renting it.

I fully support his position, we should give money to every tom,dick, and harry that wants to buy a house and flip it or rent it that walks in the door.

We don't need to require proof of income, we don't need assets, and who needs regulations!

Clearly buying houses in Africa,Syria, or China would be the smart play and New york real estate isn't even worth the paper it's printed on after Sandy!

I mean, clearly New York is just overvalued and people only want to live there so they can pay exorbitant rent.

I have a bridge I'd like to sell and I don't even own it yet, nor do I have the income to show in order to purchase it or get a loan, anyone want to buy?

Also those loan rates are ridiculous, no one ever defaults on loans so they should be at 0%

Greedy banks!

/really heavy dose of sarcasm...


You just don't get it. The whole banking sector is utterly corrupted under the policies in place now.

Interest rates in savings accounts controlled by the federal reserve being pulled downward and manipulated via the central bank while people can't even acquire properties who were previously qualified to be able to get them pre the 2008 global financial crisis and new regulations imposed by congress which adversely affected the marketplace.

The regulations under Dodd-Frank and others which provide unnecessary regulatory burdens are disgusting.

Because of the policies in place, USA real estate is NOT the place one should invest because other global economies have much better real estate markets right now.

I think the real estate markets in Singapore, Hong Kong, New Zealand, Australia and Singapore are far superior than buying in the USA right now with a lot more room for growth.

I was able to get a mortgage for a rental property.

It was pretty easy.

Oh yeah, it's cash flow positive and I have the income to cover it if it wasn't.

BenH said:   What is your intended goal? Do you want to own this place outright eventually, or are you happy with a split investment down the line? Do you want the power to sell the property down the road?

I think that as long as you get a (real) contract which states all the terms then you will be safe. For instance, perhaps they are putting more down, but you have the option to pay off a larger percentage of ownership over the next 10 years and perhaps buy it outright from them (if that's what you want). And perhaps they get free rent (if they are wanting to live there) on a unit, and/or rent stabilization if you eventually own the place outright. Another poster brought up a good point of divorce - so perhaps you should discuss what happens if there is something of that magnitude. One such clause can be no selling unless all parties agree (may be bad for you too though, depending...).

The short of it is, all sorts of things can go wrong when you aren't 100% in control (and sometimes even when you are). Discuss with your friends what you are both hoping to get out of it and draw up a contract with an attorney to meet those needs. Just be sure that nothing in the contract can't be superseded by local real estate laws.


I already live in one unit in this property and intend to stay here for at least 5-10 years if not more.
d love to own it entirely, though i could live with 2 units: less income, but less landlording too.


About the downpayment: so far, my partner offers that i dont put anything down: while this is always a convenient offer, im wondering if this is a right thing to do, could this be used against me at some point? I like the idea of buying back a larger proportion of ownership over a couple of years.
I sure would like to be able to sell my share (40%, and not %50) if needed.

Yes she s going to live here too. So far we re into a very constructive discussion with partner, addressing a lot of potential issues, and being very clear about the fact that we dont want any bad feelings/acrimony since we re going to be neighbors too. Obviously the fact that she (and hubbie) are going to take over the purchase is a bit scary - what if they then tell me "we re not lease-selling anything sorry" ???

Also she says that she would not do if i ask for more than 40% - i ll repay 40% of the total loan.
I supposed at some point i might have to repay 40% of whatever they pay as a downpayment right?

BADADVICE said:   Huge potential for messiness.

What if the couple you are partnering with gets divorced? A messy divorce could hurt you deeply.

What if your partner dies and their share of the property gets split among 16 different beneficiaries?

Just realize that if you go though with this deal, not only are you contending with the inherent risk of the real estate market, but you have the added risk of betting on the stability of partners you hardly know.


Good point.
Though let say i own 40% of the building and have my name on the title: if they divorce, one may want to buyout the other one s share, or both may agree to sell their 60%. Either i buy their share, or someone else does (with me having a right-of-refusal for instance): what s the risk for me?

thelord said:   I would be interest to hear how this turns out, as I am considering doing a similar thing but with a family member. Can't qualify for the mortgage but could easily pay the mortgage... Let us know what happens. I think the most important is to get a real good lawyer and think about everything.
getting 50/50 might be alittle much in my opinion, though you need to think about the fact that you do bring a downpayment. You bring the $200k that your landlady is giving you as a rental discount. So i would work the deal based on that, personally. Your down payment is the $200k discount...


Thank you, i do think too that i did participate in the down payment after 10 years of paying my full rent on the 1st of each month in cash without any single exception. I ll bring this point up at a further meeting, hopefully my partner would see it like that too.
I could live with 40%, though i dont really understand why they would not want to do 50/50, even i participate to more down payment. Any idea why?


That doesn't mean you got 1.2M, that means your Cosigner is worth 1.2m.
And LLC will protect you more than say, you and a friend bought it together, and now we are fighting.

Ask yourself

1. Why is she selling
2. How many units are empty
Too many empty units is bad, all full units is bad (Rent Control)
3. Is the building 100% Structurally sound?
Did you get a professional inspector?
4. She said she's got offers. That's what the guy who sold me a lemon car last year told me too.
5. Does the building have code issues?
6. Does selling the building pass all the lien's , judgements, lawsuits, to the new owner (You?)


My original cosigner and I got approved together: nor I nor she could have been approved 1.2M by ourselves.
Plus it was a FHA loan with 3.5 down, and we had to fit into a certain income bracket.

LLC down payment and interest are too expensive unfortunately.

1 - she s selling before being foreclosed
2 - it s a 4 units, they all occupied with 1 year lease tenants and no rent control
3 - building has been said structurally sound twice
4 - a lot of "private investors" are knocking at the door every other day (the rest of the time they put "We buy CASH" flyers in every mailbox), and indeed, they offer cash and can bring the money "tomorrow". Of course do they inflate the price to impress potential sellers..
5 - the building has been built 75 years ago and already was over the quota, so there s no way to add any floor or construction. I want to build a roof-deck though, would this be a problem?
6 - i do not know, i suppose so no? So far no lien has been found, except for the current mortgage.

Hublot said:   BADADVICE said:   Huge potential for messiness.

What if the couple you are partnering with gets divorced? A messy divorce could hurt you deeply.

What if your partner dies and their share of the property gets split among 16 different beneficiaries?

Just realize that if you go though with this deal, not only are you contending with the inherent risk of the real estate market, but you have the added risk of betting on the stability of partners you hardly know.


Good point.
Though let say i own 40% of the building and have my name on the title: if they divorce, one may want to buyout the other one s share, or both may agree to sell their 60%. Either i buy their share, or someone else does (with me having a right-of-refusal for instance): what s the risk for me?


Somebody correct me, but the risk for you is that if only their name is on the title, they own 100% of the building and after the deal is done (or down the road, or after a divorce or whatever the situation) they can just sell the whole thing and you get nothing and are evicted onto the street. This is why you will need a very clearly stated legal agreement.

If I am reading right, she is already missing payments. How much does she owe? Will $1.5M cover it? If she is close to being foreclosed, she might have stopped paying property tax, utility bills and might have other liens (mechanic's liens etc doesn't show up right away in public records). Definitely don't assume. Given her $$ trouble, why would she leave $200K (discount for you) on the table? Deal seems to be too good to be true.

Skipping 29 Messages...
OK, so the current owner inherited a property maybe worth $1.7 from her parents. Her parents put a reverse mortgage on the place; paying off the reverse mortgage costs $500k. The current owner, who has $1.2 mil equity in this building, which supposedly cash flows, cannot obtain a $500k mortgage. The company holding the reverse if going to foreclose if they don't get their $500k. Current owner needs a solution and fast. If current owner lets the bank foreclose, even though the bank would owe current owner $1.2m, bank and transaction fees are going to eat up at least $200k of that. Thus, current owner is willing to sell for $1.5, net out $1 mil and not have a foreclosure on her credit. Did I get it right so far?

- Why can't the current owner get a $500k loan to pay off the reverse? If the building is really worth $1.7, it is not for lack of equity/down payment. If the building is rented and cash flows even half as well as the OP's projection, the current rents should more than cover the $500k loan, so it can't be a debt to income problem. So there are three possibilities
1. Building is not worth what OP posted, and there is an equity /down payment problem.
2. Building does not cash flow at even 1/2 of what OP projects, so it's a debt/income ratio problem.
3. Current owner has lousy credit and can't get a loan, which is a good reason to not go into partnership with current owner.

In regards to the partnership with the other couple, sounds like they know what they are doing and OP does not. I would not go into a $1m++ deal if I did not know what I was doing. Plus OP, you really are bringing nothing to the table other than the deal. And truth be told, the deal is there for them without you. Current owner needs to sell. All the "We buy houses" flyers are meaningless - that is marketing, not real interest. They may buy houses, but I'd be willing to bet they offer the current owner $1 mil on the $1.7 mil purported value.

OP - if this is such a great deal, why are you not doing it with your original partner with whom you qualified?

Also, what are you going to do if the boiler breaks down 2 weeks after you purchase it? Do you have enough cash to have a replacement installed?



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