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The LLC, which has no credit history because it is new, gets a loan based purely on Mike credit score and history, since Joe is bad / non existant.
Essentially you are correct in what Nike Air Max 1 Ultra Moire White/White you wrote.
It is a very risky thing to do. Looking at it from Mike point of view:
You can have 50/50 equity/gain share valuations to determine the purchase price in the future. For example, if they bought a condo for $100K and 3 years down the road it was worth $150K, then each would share 50% in the increase in value. That would mean that Joe would buy it for $125K from Mike.
In the end, if Mike wanted to leave, then Joe does not have to quit claim or sell the property to another LLC. Simply buy out Mike share of the LLC ownership. It would become a single member LLC, but the name and entity would still exist. The mortgage due on sale clause would not be triggered because the LLC is still the owner of the property. Joe would have to discuss with the lender about signing his personal guarantee and have the lender release Mike, but after there is history with the lender, then based on that, there probably would not be an issue. Joe can offer Mike a note for the amount that is his due share or refi the entire amount to out Mike.
One additional thing Mike would have each year with the income and expenses. Depreciation expense. Mike would have a net income and then he would get depreciation expense to bring him to a loss that would be able to take on his tax return (maybe). It would lower his taxable income and reduce his taxes owed, so he gets a benefit there.
The LLC is listed on the title
That why all the answers from CPAs and lawyers are " It depends."
I would not suggest that someone obtains a loan and passes it on to another just because of the goodness of their heart.
Just one option, but it might take a lot of work to make it happen and all parties have to believe in the venture.
bear all of the risk of this operation failing and will not receive anything in return.
" Expenses" could then include mortgage and running costs ($800 pm) in addition to a $200 " management" expense (or similar) to Joe.
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If Mike got a loan from the Lender, but Joe made all the payments, then Mike would be on the hook if Joe failed to make the payments. Joe would be able to take all of the tax deductions associated with the loan if he made the actual payments and Mike would not receive any tax benefits.
I suppose an incentive for Mike would be an equity split on sale (as you suggested), or an up front cash fee, or a payment to Mike upon re fi, or something similar.
Mike is on the hook for the mortgage or any short fall during a foreclosure. That means Mike bears all the risk. Mike does not have his name on the title of the property (assuming he is just a co signer). If he is not on the title, then he does not receive any tax benefits with the losses generated by the rental real estate operation. He does not receive any excess cash from rents after expenses debt obligation. So in short, if Mike got a loan for the benefit of Joe so Joe can get this property, then Mike will Nike Air Max 97 Replica
Sorry for the gory details, but you can explain half way to get the true understanding. Even after all that, there is still other things to discuss because deal making is very fliud and there are different pros and cons on the tax and legal sides of each path you take.
Joe and Mike would benefit. Joe and Mike would not have to have any money down to do this. There is an incentive for Joe to do well and make the right decisions. Mike is getting a reward for the risk by receiving the tax losses currently and then a larger gain/cash/note in the end.
needs to report to the IRS and is able to receive cash. Joe can build himself back up, restore his own credit and in the future obtain his own loan to purchase the property from Mike.
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In effect, Mike net Tax obligation would be zero (until the property was sold), and Joe would get an income of $200 per month. In reality, Joe would be actively managing the property, and Mike would have to do nothing.
On the other side of the coin, Joe has no risk in this and nothing but gains and rewards and has no consequences on his actions in regards to this operation. He fails to have any incentive to be successful.
If Mike is willing to participate to help Joe build himself back up, then I would suggest some sort of LLC partnership operation with special allocations to give Joe a guaranteed payment of the cash flow amount distributable and then give Mike all the revenues expenses, which include the guaranteed payment to Joe and depreciation. That way, Joe has income he Nike Air Max Zero Black Grey
Joe could then re finance the property under his own steam once he has built up his credit. Or, could the property be quit claimed into Joe personal name or another LLC? For that matter, I suppose the loan could be assumed by Joe as well.
" Income" includes all gross receipts generated by the property ($1,000 pm)
LLC partnership agreement essentially states that all income and expenses related to the property are Mike responsibility.
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