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Be wary about splitting anything financial with family or friends... I’ve heard of bad situations where one person leaves the house a mess/ doesn’t follow same standard of taking care of house / nickeling and diming extra costs
I agree with Attorney 1!! So many good points to consider. Example: One of the situations that I’ve seen happen is one person not being able to afford the home later on..gets very messy fast
Also, something to consider is that you may be more understanding of your brothers ways and how he would care for the home but your wife may not be after a while. This would put a strain in your family dynamic ... wife could get annoyed with your brother and vice versa which puts you in a hard position. I’ve actually seen this happen in my own family (dad and his brother)
If you think it’ll be a vacation rental too, make sure you set up terms for use? Will you rent it or use it for holidays/peak season? How do you decide dates for use if you want similar ones? Do you have to pay for a cleaner when you leave so that it’s ready for guests? What happens if one wants to sell? Does the other have first right or refusal to buy out the other person? Just best to sort out so that you don’t end up with finance issues that could impact your relationship.
Really think through this, I have an Airbnb and you want to keep good reviews. So who manages the guests? Do you have property management company, do you have a cleaner come after each use so that it’s always ready for a real guest? Who does the restocking? Who takes guest calls. Is income split 50/50 for taxes? If so you need to set up the Airbnb account that way for tax docs. Lots to think through. Try and talk through every crazy situation you can think of and talk through it... Eg if someone passes away, who is the beneficiary? Does it go to you or a their spouse?
If you aren’t paying cash (and only 10% down) it’s extremely difficult to buy it in the name of an LLC.
May not even be possible to do 10% down on a non owner occupied property.
I bought a vacation rental beach house, second home at 10% down. Going through an LLC is tricky as you need to have the cash in the LLC or buy it personally then transfer over to the LLC. It’s much easier to buy personally and get extra liability insurance. I’m about 4 months in on the beach house and it’s going very well - feel free to ask anything. I listened to bigger pockets - more applicable to long term rentals but the basics of the deal and valuation are still the same. I also analyzed 10 or so deals and put offers on 3 before closing on this one.
Btw - in what area are you looking at the cabin? I’m starting the analysis on buying a second rental property and a cabin is where I’m leaning.
Cobuy’s an interesting site that makes it easy to do this
You'll need to have someone sign it as a primary home to do less than 20% down. Which u can do if one of you does not have a mortgage for a primary home yet. You can still split the down payment if you're clever. You could start a business account, incorporate, wire money through there as a capital contribution then have the primary signer take the money out as a paycheck or paychecks. Downside is increases taxable income. But primary signer can take depreciation to offset.
Check out BiggerPockets.com as a resource and ask your questions there. Lots of people who have rentals and AirBnB businesses there.
I am pretty sure that investment homes require a minimum of 20% at least in my state
Not sure whether you can package it with two unmarried people on the note, but I think you can do a second/vacation home mortgage with 10% down.
Mentor
Too many what ifs in this post. Talk to a lender OP. Lay out a few scenarios.
And an attorney. Even if you get the money, there are tons of potential pitfalls.
Thanks all. Sounds like two primary pools of thought based on the responses. 1) the T&Cs need to be worked out if I do decide to go in on this investment with my brother as it sounds like it could get complicated 2) the loan will be tougher to get without a larger down payment. Lastly are you all bullish or bearish on the RE market right now? Anyone here investing in rentals?
Regarding markets, it really is regional. I have two places near the beach and also a college town, so generally a pretty tight rental market. My homes were more expensive, so I don’t have a positive cash flow but they’ve each gone up about $200k in 5 years, so I’m looking at it more long term as a place I can retire to and have equity increases vs a significant positive cash flow. Despite this, property values have still gone down a bit. Last year they were up an additional $50-$100k. So you really need to know what the market is where you want to buy. In my market, if I was going to live there and plan for the very long term for using it, I’d buy now. If it was something shorter term, I would hold off