what is the safest way to co-buy a property were going to flip?

the house needs to be remodeled first.

both of us have great credit and income to afford the debt.

we can pay cash for the property, but are concerned about running short on the remodel.

my concern is how to best title the property so both parties are responsibile for the loan.

my loan officer has suggested i buy the home as an owner occupied loan, which is fine with me, but that leave me on the hook for the entire loan.

should we forget the bank loan and make equal deposits into an escrow account, title it in both names. use that money to pay for the house and start the remodel, requiring both signatures to draw funds from the account. later get a home equity line of credit to finish the remodel?

is a simple writtten agreement worth the paper it is written on?

can you give me any suggestions, advise, do we need an attorney?

thanks for your suggestions.

michael

Fr_Chuck

Personally I would either have a very complete partnership agreement signed, as to who is in charge of spending what money, who makes the final choice of spending money, what if you want white and he wants blue.

Next I would get a complete estimate of all of the repairs,
And I mean complete, I have one, I have just pulled the kitchen sink cabinet and guess what not only some bad floor but some of the actaual outside wall is rotten. So my 1000 kitchen cabinet is not up to about 4000.

excon

Hello Mike:

A simple partnership agreement will do, and yes, you should have an attorney draw it up.

excon

bushg

1. Get everything in writing , like fr. said, colors what gets put where, how much to pay for a sink, carpet, hardwood, will you tear out walls, move lights, vents, go room to room and plan it out to save hassles. Make a list or when you start rehabbing you may run into problems on who thinks what should be done and how much money needs to be spent.
2. Get the loan and title put in both names if each of you are to be responsible, I would contact a real estate attorney. Have a written contract on what to do incase one wants to get out before the house is rehabbed and sold, yes this happens.
3. I am not so sure of the type of loans my husband gets but his loans cover the rehab and cost of the house and he makes no payments until he sells the house. He goes every so often and gets money from the lender to do the work. They have agreed on a set amount that they will be borrowing. After the house is sold he pays the loan back plus the interest and fees from his profits. He and his partner split the profits.
3. He keeps a record of the hours he puts in, starting with travel, looking for the house, buying the products and the actual labor. everything is accounted for to see how much money he is earning based on the time he is spending on the house.
4. Don't rehabb with family!

Fr_Chuck

yes and I will tell you, there can not be two bosses on any job. Make sure that who is going to do what work ( unless you are going to hire all contractors)
And if you don't know how to do repairs, hire it done it will be alot cheaper in the long run.

Next what happens when it is time to sell, and you get an offer 5 k under asking, you want to sell, they want to refuse the offer, who has the final say ?

DianeV Sr Loan Officer

If you are not going to live in the house, DO NOT finance as an owner occupied... Can you say " Fraud" ? This is an investment rehab property. Most banks do not do rehab loans on an investment property for flipping purposes unless it is throught their commercial division. It would be treated very similarly to a construction loan. Which is whay I thing Bushg's husband is doing. This is a business transaction.

You need some legal advice. And accounting advice. You may want to set things up as a corp. or an LLC or sub S corp. That way all the expenses and profits are accounted for and distrubted according to the terms of the set up.

And just and FYI, most construction loans require at least 10% of the estimate cost of repairs in reserves in the event of overruns.