How To Invest In A Family Member's Home
Ask the Real Estate Lawyer: Real Estate Law Q&A
REM # LAW 730
By Ilyce R. Glink and Samuel J. Tamkin
Summary: A ThinkGlink reader is planning on
buying a home with the help of his family. Ilyce and Sam explain that the brother
could help mortgage the home or become an investor in the home.
Q: My brother-in-law is willing to lend me money for a down payment on a house.
How do I go about defining him as a fractional owner of the house?
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He wants to be on the title as a fractional owner to be able to list the home
as an asset.
A: If your brother-in-law is lending you money, why is he going to be an owner
of the home? If he lends you money, he becomes a lender and you can give him
a mortgage on the home. You would be responsible for paying him back over time
and paying interest on the money your borrowed.
If you mean that your brother-in-law is going to be an “investor”
with you in the home, you and he have to decide what percentage ownership he
should have in the home. If you and he both put down the same amount and each
of you will pay one half of the expenses for the home, you each own 50 percent
of the home. If there is a different arrangement, you will have to decide what
percentage to allocate to him.
If he puts down a small portion of the down payment for the home and you will
pay for all of the expenses for the home, it doesn’t take a whole lot
of imagination to see that you and he may soon be fighting several years down
the line, after you’ have made improvements to the home, paid down the
mortgage and its value has increased substantially.
What should his percentage ownership be at that time if you have put all of
this money into the property and has hasn’t contributed a dime past the
You need to treat your relationship with your brother-in-law in this matter
somewhat like a partnership and discuss what each of you expects out of the
deal under best-case and worst-case scenarios. Then you should work with an
attorney to draft a document to make sure each of you is getting what you expect
out of the deal. Good luck.
Samuel J. Tamkin is a Chicago-based real estate attorney. Ilyce
R. Glink’s latest book is 50 Simple Steps You Can Take To Sell Your
Home Faster and For More Money In Any Market. If you have questions for
them, write: Real Estate Matters Syndicate, PO Box 366, Glencoe, IL 60022
or contact them through Ilyce’s website www.thinkglink.com