Re: Questions bout Contracts/Equity Share - Posted by John Corey
Posted by John Corey on June 17, 2006 at 10:29:02:
The lender your uncle is using will want to know where the funds came from (in most cases). What is he going to say? That he and you are buying the place together but you will not show up on the title? That means you have no stake in the property and are not sharing the equity.
You could go on title. If you are on title to the property you will end up being on the loan. Your credit score might have little impact to the interest rate if you have a decent score and are the second person listed on the loan.
You could gift the money to your uncle and then later have yourself put on the title in some way. Generally this would be illegal in that your uncle said it was a gift and then you appeared later. It would not be illegal in all cases. The issue is one thing was said to get the loan and another was really going on.
You could agree to buy an option in the property where the strike price is 50% of the present price and 50% of the future value minus debt and cash contributions. Basically splitting the profit. The funds could be put into escrow for the option and the deal could settle with funds from the option being used. The option would be recorded after your uncle is on title with the loan in place. The lender may or may not care about an option being sold. Your uncle would have equity in the property, some of which he is trading off at some later date.
None of the above matters is the deal is not a good one. There is nothing you have said that makes this sound like a good deal. Maybe it is and you just have not shared the details. Or maybe the deal is a bad one no matter how bad you uncle wants the property.
You have nothing to report to the IRS as you have had no gain (income or profits). You will have something to report later if you make or lose money.