Borrowing Money From Friends
i have some friends who i can borrow money from. they'd rather get the 6.5% interest on their cash than have me paying it to the bank.
in order to deduct the payment i make to them on my taxes, do i need to record their loans against the property???
If I lend you money to purchase property, I would want some sort of lien recorded against the property so I have recourse if you default.
You friends might be more generous than I and not require a lien; preferring to give you an unsecured personal loan, instead.
Yes. And create a legal document and keep it all on a businesslike footing if you want to keep the friends
i think the question is how to get the tax deduction and not how to keep ones friends!
do you need to file a lien against the property in order to claim a tax deduction against the interest paid. or
is a legal document sufficient?
I'm assuming it's an investment property? I don't think you need to secure the debt w/ the property but you definitely need to be able to prove that the proceeds went directly into the purchase of the property. I would go as far as to set up a separate account for the receipt and disbursement of the funds.
You certainly should have the loan in writing. It is reallly up to the parties involved how you want the loan to work. You could have it loaned against the property and a lien recorded. If you want to keep it really simple, and the lenders are ok with it, you could just sign an unsecured promissory note.
Good Luck!