Q: Want to buy land/develop with friends. Can one of us get mortgage and others be considered owners with contract?
Looking to buy land/develop homes for a business. Have multiple friends involved. Can one of us get the mortgage and then right up a contractual agreement between us to hand out ownership %'s? So for example, the person with the strongest credit gets the mortgage/loan to build and they own 40%, the two others are going to invest 30%/30% respectively.
A: It's theoretically possible, but there are some complications. Most deeds of trust have a "due on sale" clause. This means that if you transfer an interest in the land to your partners, the lender can call the loan. You should disclose all material facts to the lender and get written assurances that the transfer will not trigger this clause. You might try forming a corporation or an LLC to buy the land and dividing the interests any way you want. This should also be discussed with the lender in advance and they may require personal guarantees.
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