I have a MFJ client. This MFJ client investments in one to four unit rental real estate, and is starting to scale pretty quickly.
Recently the client couple partnered with a sibling and the sibling's spouse to buy a few properties. Most of the properties are TIC ownership on the title (50-50 my client couple and the sibling and spouse) and both couples are on the loan. That's clear cut and above board.
However, for one of the properties, my clients are not on the title and they're not on the mortgage. I inquire and my client states that they "put down" 50% of the purchase cost and they "own" 50% of the property. As they're related parties, I assume this is a verbal and handshake agreement.
I'm slightly uncomfortable with this dynamic. Particularly because I don't really understand how you'd be able to do this without deceptively filling out a mortgage application.
Would you be comfortable splitting the revenue and expenses 50-50 in this situation?
I'm also concerned about at-risk basis. I don't believe my client has basis in the mortgage as they're not a signer or co-signer. Are they at risk only for their capital investment, absent any kind of written agreement to the contrary? (if that's even permissible and enforceable)
I should have really quoted more for this return...