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Old    Bruce Mac (brucemac)      Join Date: Dec 2005       08-16-2006, 10:36 AM Reply   
I know this isn't the best place to ask, but there are a lot of affluent and knowledgeable people here on WW so I'll ask anyway. My wife and I have always been interested in a second home both as an investment and as a recreational retreat. We've found that as time goes on things just keep becoming more and more out of reach in our area so we've been kicking around the idea of going in on a place with a couple of our very close friends who share the same passion for boating, watersports and family fun. What I'm wondering is, are there any people here who can share some advice on just what it takes to write something like that up? Where do we start? Obviously, we'd need an attourney to help draft all this up, but I'm wondering are there documents that give examples of such arragments out there to review and get ideas from? Anybody know how the tax write off works when there is more than one party involved? Any nudge in the right direction would be most appreciated. For those of you in Eastern Washington reading this, we're looking for a view home on Lake Roosevelt, either Kelly Ferry area, or Seven Bays. We're also interested in Banks Lake area, but there just doesn't seem to be much available in that area as much of it is state and federal owned. thanks in advance.
Old    Byrd (byrd)      Join Date: Dec 2005       08-16-2006, 11:15 AM Reply   
I'll take a shot at it. I own my own Mortgage Business and I also own Investment Properties with others and by myself. First of all, I'm in Florida, so check your state laws to see if they work the same. What works for me might not work for you. To begin with there are a few different ways to go about it. The first I would recommend would be to set up a corporation with equal shares depending on how many families will own it. The advantages are that your personal liability will be limited to the assets in the corporation, so if someone hurts themselves, they can only sue the corporation, not you personally. The disadvantage is that most lenders require at least 20% down for a second home to be titled in a corporation. Also, Fannie Mae and Freddie Mac will charge you points if you call it an "Investment Property", whereas if you call it a "Second Home", as long as it is not located in the same county, no extra fees will be charged. Fannie Mae and Freddie Mac might not buy the loan from an institution if it is in a corporate name, but will buy it if it is titled as individuals, you can always go back after the close an re-title it, or quick-claim it into a corporation. AS far as the tax issues are concerned, if you set up the corporation as an S-Corp, the loses or profits are considered pass-thru, and are added or subtracted from your Pre-Tax Income on Schedule E. This is how I have my stuff set up. A lot of attorneys try to convince people to set up Limited Liability Partnerships, but IMO, they are more complicated and therefore you need an attorney to set it up, thus increasing the fees to an attorney. With an S-Corp, you can set eveything up online for about $250. If you have any specific questions, feel free to email me or respond to the post.

PS - My fee for this advice is a pull or two if I am ever out your way, lol.....

(Message edited by byrd on August 16, 2006)
Old    Eagle Jackson (eaglejackson)      Join Date: Oct 2004       08-16-2006, 11:24 AM Reply   
My only advice is to think very hard about whether you want to own it with a friend or find a way to own it yourself. Co-ownership of a house may be a surefire way to ruin a close friendship.
Old    Tracktor (tracktor)      Join Date: Sep 2005       08-16-2006, 11:24 AM Reply   
Byrd gave good advice. I'm a mortgage banker and I have done a couple of these deals here in Washington. You have two main issues, the legal ownership side and the financing side. Some parts of each effect the other, some do not. I would sit down with all parties and draft up how, in a perfect world, you would want it to work. Then put in contingencies for anything that could go wrong. If you all are in agreement, the think about moving forward with an attorney and a mortgage person, if necessary.......
Old    G. Rios (dreambig)      Join Date: Jul 2006       08-16-2006, 11:47 AM Reply   
Hey Byrd and Giles Im a wholesale Rep at Fremont Investment. We should start closing loans together. That is if you dont already have a Fremont rep. I have some sick new programs. Give me a call
925-681-6137
Gabe
Old    D. Up. (doubleup10)      Join Date: Jun 2006       08-16-2006, 11:56 AM Reply   
I would second Eagle's suggestion. If it is at all possible to swing it, I think you'd be happier in the long run owning the property yourself. Co-ownership, especially when it is a property that will used primarily during one season (summer, in your case), leads to time conflicts, personal habit conflicts, ect. as everyone tries to maximize their summer use. When you own the property yourself, the buck stops with you, and often this is the most comfortable arrangement. The close friends can always be invited to come and spend time...
Old    Byrd (byrd)      Join Date: Dec 2005       08-16-2006, 12:05 PM Reply   
Hey G. Rios, I'm already set up, my rep with Fremont is Dustin Davis.
Old    Bruce Mac (brucemac)      Join Date: Dec 2005       08-16-2006, 12:58 PM Reply   
Hey thanks a TON for the replies and everybody's comments. Byrd, your advice on an S Corp is very intriguing. I will look into that more. Hopefully that's something that can be done here in WA State. I may call you if you don't mind. Limiting liability would be huge. I appreciate the comments and devil's advocacy on the whole partnership thing, and they're well deserved. It's just that with the rate that things are climbing here, properties continue to soar out of our reach and the buying potential becomes so much greater when you multiply x2 and co-own something. I don't fantasize for an instant that it's a risky propisition, but I think it could work out well if structurered properly from the get go. Life's just too short not to take a chance or two along the way and this takes a little of the burdan of the huge monthly payment off of our sholders and frees up some discrecionary income. I need to find a good attourney that's for sure. I guess I'll start with my accountant and have him point me in the right direction. If there's anybody else out there with stories/antacdotes on this type of arrangement good or bad please share or email me at brucemac@gmail.com

thanks again everybody.

(Message edited by brucemac on August 16, 2006)

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