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  1. #1
    Join Date
    Feb 2005

    Default The Best Way to Structure a Home Purchase with Co-Owners

    My girlfriend and I are in our early 20's and are about to purchase our first home. The area we live in is quite expensive and it's hard to find a nice home under $200,000. A very good older friend of ours as offered to give us a considerable amount towards the down payment so we can afford a better home. His terms are simply that we pay him back, interest free, when we sell the home in a few years (2-4), which we plan to do since we both anticipate having considerably higher incomes in the near future.

    I do not believe in "freebies" and would like to come back to him with the offer of joining in ownership with us as an investment, where my girlfriend and I live in the house and he is simply an investor. Then when we sell the house he will receive his percentage share of the appreciated value. Too me this seems like a win-win situation. My question is what is the best way to structure this? I am concerned with legal issues, tax issues, etc. Can we simply have three owners on the home with one owner (my friend) owning a smaller share of the home and not occupying the home?

    Also, what if he absolutely refuses to accept ownership and wants to lend the money to us interest-free. Can he simply right us an interest-free loan? Thanks so much for the help.

  2. #2
    Join Date
    Mar 2005

    Default Joint Ownership

    If all your friend wants is assurance that he will be repaid, your best approach is to give your friend a lien on the house - not to make him a co-owner. The lien can be recorded with the register of deeds, and would ensure that he would ultimately be repaid.

    If you want to pay him extra when you pay off the lien, that's probably the best way to express your thanks. (If you make him a co-owner there may be effects that he wouldn't care for - he would probably have to be identified on any mortgage, and would share responsibility for property taxes.)

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