Sib­lings buy­ing, shar­ing prop­erty should sign a part­ner­ship agree­ment

Sun Sentinel Broward Edition - Homespot - Broward East - - REAL ESTATE MATTERS | LIVING SPACE - Con­tact Ilyce and Sam through her web­site, By Ilyce Glink and Sa­muel J. Tamkin

Tri­bune Con­tent Agency Q: My­sis­terand

I are think­ing of buy­ing a two-fam­ily home in which we both will live. Would we do a joint own­er­ship and joint mort­gage? Will we both be able to claim the mort­gage in­ter­est when we file sep­a­rately? A:

It’s nice that you and your sis­ter have a good enough re­la­tion­ship to want to pur­chase a home to­gether. A lot of sib­lings wouldn’t want to live that close to each other, let alone take on this sort of joint fi­nan­cial re­spon­si­bil­ity. If you take some ba­sic steps to for­mal­ize your re­la­tion­ship with re­gard to this pur­chase, it will help keep the fi­nan­cial side of the re­la­tion­ship sep­a­rate from the emo­tional side.

When two un­re­lated peo­ple pur­chase real es­tate, there are a num­ber of de­ci­sions they have to make about the pur­chase. They have to de­cide how they’re go­ing to hold ti­tle, who is go­ing to put in what cash, and who will pay what car­ry­ing costs, such as the mort­gage, real es­tate taxes, in­sur­ance and main­te­nance and up­keep ex­penses.

If you and your sis­ter own the prop­erty jointly, put down the same amount of money, and take out a mort­gage with both of your names on it, you each should be able to write off your share of the mort­gage in­sur­ance and prop­erty taxes. While you would share in the real es­tate de­duc­tions, how­ever, you will each be re­spon­si­ble for the en­tire mort­gage you take out. So, if your sis­ter stops pay­ing her share of the mort­gage, the lender would look to you to cover the en­tire amount due.

The lender should send each of you a tax form at the end of the year ac­knowl­edg­ing how much you’ve paid dur­ing the year.

How you hold ti­tle has iim­pli­ca­tions for your taxes. Will you own the prop­erty equally or will one of you own a slightly larger share of the prop­erty? The tax bill should be di­vided ac­cord­ing to the own­er­ship.

You can make sure this hap­pens by draw­ing up and sign­ing a part­ner­ship agree­ment, in which the own­er­ship and fi­nan­cial re­spon­si­bil­i­ties of each party is spelled out. That way, there will be no misun­der­stand­ings. You also may de­cide that one or the other would own more than 50 per­cent if one apart­ment is larger than the other. You may have other con­sid­er­a­tions when de­cid­ing your own­er­ship in­ter­ests in the build­ing.

You will want to talk to a real es­tate at­tor­ney to go through the prop­erty is­sues with you and also help you with some agree­ment that both of you would sign to in­cor­po­rate other is­sues re­lat­ing to your co-own­er­ship of the build­ing. Some ques­tions to con­sider are what hap­pens to the home if one of you dies, be­comes in­ca­pac­i­tated, has a loss of in­come, or wants to ex­pand or ren­o­vate the home.

Fi­nally, you and your sib­ling should dis­cuss what hap­pens if one of you de­cides to sell the prop­erty or rent it out. You may want to give the other the first right of re­fusal to pur­chase the other half of the prop­erty, or you may want to leave it to the other in your will. But talk­ing about all of this ahead of time will en­sure that you and your sis­ter un­der­stand how the fi­nances will work, as will your ex­tended fam­i­lies.

Ilyce Glink is the cre­ator of an 18-part we­bi­nar and ebook se­ries called “The In­ten­tional In­vestor: How to be wildly suc­cess­ful in real es­tate,” as well as the au­thor of many books on real es­tate. She also of­fers in­for­ma­tion on her YouTube chan­nel. (­pertRealEs­tateTips).

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