Financing in 98250>Question Details

Tim, Both Buyer and Seller in 98250

I am wanting to purchase a duplex and need to borrow some money from a family member to do it. Is that legal? What are the tax implications?

Asked by Tim, 98250 Fri Nov 5, 2010

The property is for rental purposes only and will be held in an LLC. Does the lender have to be a member of the LLC?

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Your realtor should be able to provide some data or refer you to a tax professional for advice. I believe individuals are allowed to gift up to $13,000 tax free to a family member. View the IRS website about "Frequently Asked Questions on Gift Taxes" : http://www.irs.gov/businesses/small/article/0,,id=108139,00.html
0 votes Thank Flag Link Tue Nov 9, 2010
Not sure how it works there, but here you can get a gift from a relative. It happens all the time. There is an IRS form that has to be filled out and submitted to the underwriter.
0 votes Thank Flag Link Sat Nov 6, 2010
For clarification, the property is being purchased in cash--no bank loan. I have about 90% of the funds and would be borrowing the other 10%
0 votes Thank Flag Link Fri Nov 5, 2010
I have re read your question and I am not sure you can buy a rental property with borrowed money. I think the relative will have to be on title. The bank is going to want you to have the money in your bank for a proven period of time. I have owned rental property in an LLC and the lender was not part of the LLC.
Web Reference: http://www.SindyVerdugo.com
0 votes Thank Flag Link Fri Nov 5, 2010
If you are buying owner occupied and getting an FHA loan your downpayment can be a gift from a relatave. There are some guidelines regarding you having some money in the bank of your own for a couple of payments. An emergency fund. I am not sure what tax implications you may be thinking about. The money cannot be borrowed, that is not legal, it needs to be a gift. When you sign your loan documents you will be stating that your downpayment is not borrowed. If a loan if recorded, you could be liable for loan fraud. If nothing was recorded against the property or in writing and you refinanced later and gave your family member a gift back? You are just one big gifting family. You couldn't deduct the payment to the family member as... it was a gift.
Web Reference: http://www.SindyVerdugo.com
0 votes Thank Flag Link Fri Nov 5, 2010
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