Equity Partner
A friend of mine has offered to make the downpayment on a home I would like to buy. His investment would be 20% of the property value. He would get his money back when I sell it, plus 20% of the profit. But he is interested in the tax deduction too. Would it be right/fair for us both for me to give him 20% of my deduction, even though I will be making all the payments? Are there any sample contracts out there for us to look at so we know what other issues we need to address? Thanks
I think fair is a relative term in your situation. You need his cash and he needs some deductions.
If that is the only way for you to buy the property, then I guess it would be fair.
However, for him to get 20% of the deductions, he would have to be making 20% of the payments unless he is to get only 20% of the depreciation deductions.
The easiest way to handle this is by a co-ownership agreement. However, if you plan on living in the house, I would suggest you contact an attorney to draft the co-ownership agreement to protect you properly.
If he does not need the depreciation deductions, then you can handle his capital contribution and 20% of the appreciation through an option.
Hope that helps,
Taxjunkie