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CalAttorney2, Lawyer
Category: Real Estate Law
Satisfied Customers: 10215
Experience:  I am a civil litigation attorney with experience representing HOAs, homeowners, businesses and others in real estate matters.
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I want to sell an undivided 50% share of a four unit

Customer Question

I want to sell an undivided 50% share of a four unit residential rental property to a friend/partner. The property is located in Minneapolis, Mn. 55409. I am planning to get a cash downpayment from him and carry the balance at 5% for 20 years. His 50% share of net income will almost cover his monthly payment to me now and more than cover within a year.
Questions: 1. Should we both be on the minimal cash out loan as a new LLC? even though I will pay the P and I.? 2. My tax man suggested that partner should make his monthly payment to me out of his personal account rather than just transferring net money from our joint account to me. Do you agree? 3. I am suggesting that if this agreement does not work out to his satisfaction sometime between the 12th and 36th month, that he could opt out. I would return the money he had paid down on the personal loan plus I would pay him half of the appreciated value on his 50%. I suggest the other half of appreciation on his 50% would be the cost of getting out of the deal. Does that seem reasonable/fair?
Submitted: 3 months ago.
Category: Real Estate Law
Expert:  CalAttorney2 replied 3 months ago.

Dear Customer,

Thank you for using our forum. My name is ***** ***** I hope to assist you today.

Your tax professional is suggesting this setup because it will best benefit you (as well as more accurately reflect the proportional ownership interest in the property at the time the payments are made).

Regarding the terms of your contract, you can reach whatever terms of agreement are agreeable to the two of you.

But, please speak to a local attorney and have them help draft the actual contract. My experience (and I have had a fair amount) with "land sales contracts" "owner carrying paper" or "lease to own" (or whatever other title you want to give this arrangement) is that they are fraught with problems. There is no reason why these contracts shouldn't work, but they start out with a difficult combination of landlord/tenant law and real estate purchase agreement, and enforcement by both parties is complex.

If you add to that a contract that is drafted by the parties with the best of intention, but without any legal training, you usually end up with a set of terms that does not exactly match the problems that may eventually be encountered (hiring an attorney to do this is done because the attorney's job is to draft a contract that anticipates problems and helps draft resolutions that are already agreed to before the problem happens).

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