How do one handle buying property jointly before getting marrried?
July 5, 2012 12:12 PM   Subscribe

How do one handle buying property jointly before getting marrried? (One partner has assets and the other one has income)

So I'm thinking of buying an investment property right now, but my situation is a bit different from the typical buying property with your partner pre-marriage. I don't know anyone who's in a similar situation as me right now and would like some inputs from MeFites.

The BACKGROUND: I'm not officially engaged to my boyfriend yet, but we've discussed marriage and are planning to get married sometime next summer. I know my boyfriend is working on a surprise engagement sometime in the next couple of months. Right now I came upon a great investment opportunity. It's a condo in a desirable location (high income neighborhood with shortage of affordable rentals and exorbitant housing prices) with a tenant already in place. I've worked with the agent who's handling the sale before, and I'm confident that a new tenant can be found quickly even if the current tenant leaves. I know what's the general rent is for a comparable condo in the neighborhood and return of rent vs. condo price is very favorable. I own a house that's completely paid off and worth about $300K, the condo is listed at $130K. Assuming the condo is in ok shape, it's hard to pass up on such a great opportunity.

The PROBLEM: I'm trying to start my own business right now. The business is new, so right now I do not have verifiable income. I have a HELOC on the paid-off house worth $50K, but I can't get an increase on the HELOC line due to income issue. My boyfriend has a good paying job and is willing to co-sign the loan, but doesn't have enough savings to put down a downpayment on his own. If my boyfriend co-signs the loan, there's a good chance I'll be approved for an increase in my HELOC line that'll be enough to pay for the condo. The rent should be more than enough to cover the HELOC payments.

Bottom Line: Neither of us can get the property on our own, but together we have a good solid chance to get this property.

The COMPLICATION: I plan to put the paid-off house on the market in Jan/Feb of next year. Due to complicated family reasons that I won't go into detail here, I have to sell the house. Assuming I can sell the house within a reasonable timeframe, I'll use the proceeds from selling the house to pay off the rest of the HELOC loan.

My boyfriend and I live in a community law state. If my boyfriend co-signs the HELOC loan, that means I have to put him on the title for the condo, however, if I use proceeds from selling my pre-marital property to pay off the rest of the loan on a joint property, how do I ensure fairness and equity in the worst case scenario? Should I ask that all rent proceeds go to my account once I paid off the HELOC by selling the house if that happens before we officially get married? And after we get married, then we switch to have the rent proceeds go to a joint account?

Has any MeFites ever been in a similar situation or know someone who did? I don't want to pass on this opportunity, but at the same time, I want to protect myself and not commit any stupid mistakes. If absolutely necessary, I can delay selling the house by couple of months or getting marriage license sooner (keep ceremony around same time), but either one would require explaining to family and while doable, not ideal. Delay selling the house would also possibly involve complicated family drama. What would you do if you were in my shoe? Any input would be highly appreciated. Thank you so much!
posted by anonymous to Work & Money (12 answers total) 1 user marked this as a favorite
You're not going to be able to through Lending Tree for this type of loan, you'll need to go to a bank or credit union where you can speak to a loan officer in person and discuss all the ins an outs with him or her.

You may be able to use the equity in your house as colateral on your new loan.

I wouldn't worry too much about verifyable income, you'll have tax returns from the past couple of years, and you can show your current information to a loan officer.

You may be able to use the equity in your house as colateral on your new loan, but find out if that will encumber the house for a future sale (once sold, could you pay off the condo loan?)

Don't have your boyfriend co-sign the loan, have him become a co-owner. Together, it should be fine, but you need to have a relationship with a bank/credit union (I vote credit union, they're the best.)

The rest of the information you provide is interesting, but it has no bearing on someone granting you and your boyfriend a loan.
posted by Ruthless Bunny at 12:22 PM on July 5, 2012 [1 favorite]

You're considering an entanglement that's probably more binding than a marriage, before you're even engaged. To accomplish this, you want your boyfriend to take on considerable risk for no immediate reward, and only maybe a long-term reward. The deal depends on the sale of a house whose value you're unsure of, and the proceeds of which you won't entirely own.

I'd say you're pushing your luck.
posted by jon1270 at 12:26 PM on July 5, 2012 [9 favorites]

I'm not in your situation, but when I had mortgage questions I spoke with the mortgage broker my agent recommended and that clarified a lot, so I recommend finding a mortgage broker and asking. Good luck.
posted by cestmoi15 at 12:27 PM on July 5, 2012

I would talk to a lawyer, who can tell you whether (under the specific laws of your state - not all community property states are identical) this is a good idea and what the consequences will be.

I know AskMe says "lawyer!" all the time, but you're talking about a 130K investment. You want to do this right.
posted by insectosaurus at 12:28 PM on July 5, 2012 [1 favorite]

Seconding lawyer. There are a lot of moving parts to this scenario and intermingling of pre-marital and eventually marital assets. It's worth it to make sure that someone looks over the ideas to make sure you're not about to get burned.
posted by skittlekicks at 12:35 PM on July 5, 2012

You are looking at getting into this complicated situation for a condo you're not even going to live in? It would be one thing if you needed somewhere to live together, but this is just an investment, AND it's an investment neither of you can afford to make without adding a bunch of potential drama to your relationships with each other and with your family.
posted by that's how you get ants at 12:58 PM on July 5, 2012 [3 favorites]


In my jurisdiction (which is not yours), there are a lot of things you can do 'in contemplation of marriage' that would effectively make one's legal manoeuvres the same as though they were actually married. But whether an intention to become engaged at some point counts as 'in contemplation of marriage', I'd have my doubts. (There's probably case law on that -- I don't know.)

One would need a lawyer for something like this. Not only because this is a complimicated situation, but also, the bank would likely need everyone to obtain independent legal advice ("I.L.A.") from different lawyers. The respective lawyers would outline everyone's respective legal interests and advise them independently of one another.

The lawyer involved may prepare a brief agreement setting out just what it is everyone intends to do, just as though they were business partners, and not just any old boyfriend and girlfriend. If things go nasty, that agreement would solve a lot of fighting later on.

These are very specialized fields, with specialized rules. I would get a lawyer. I would rely on their expertise. A lawyer (or two, more likely) would be needed anyway, so one might as well do it going in, rather than presenting a dog's breakfast of a situation later on.

Again, IANYL, TINLA. I cannot speak to your situation, and I do not know what the laws of your jurisdiction are.
posted by Capt. Renault at 1:03 PM on July 5, 2012 [1 favorite]

Mortgage brokers see the "two unrelated people buy a property together" thing all the time. That will not be an issue.

The other complications sound more like you guys need a couple of attorneys to write out some good contracts specifying precisely what will happen should your relationship or the investment go off the rails. (or stay on the rails, for that matter) You're clearly not happy with what the law provides, so you need a contract even more than the usual "you should put all this in writing" advice contemplates.
posted by wierdo at 1:12 PM on July 5, 2012 [1 favorite]

When my boyfriend and I did this fourteen years ago, we just wrote up a contract specifying who owned what and how we would settle it if we split up and got it notarized. He put down the deposit and had a great credit score, I had a high income but terrible credit, it all worked out. Mind you 1998 was a different world as far as qualifying for a mortgage went, but I imagine the process is similar.

(We got married five years later. A lot of people thought us buying the house together after dating for two years, when I was still very young, was a terrible idea, and maybe it could have been, but wow it has worked out well for us.)
posted by KathrynT at 1:22 PM on July 5, 2012

I live in a community property state too. IANYL but the following tale may help. My husband and I bought a house together before we married. He made the down payment, and we both signed on the mortgage loan. In my state, his down payment made the house presumptively his, even though I paid him a bit later for half the down payment, and though all the payments he and I made on the mortgage, especially after marriage, are considered community contributions to his "separate" property. Eventually that kind of commingling of community income with separate property can affect whether the property is treated as separate or community, and of course how it is divided at time of dissolution.

To avoid the (commonly experienced) messiness and expense of figuring this out in a contested case if we ever separated or divorced, we entered into a three pronged property agreement. These are enforceable in almost all community property states. They make all separate property owned before marriage community, and all property and debt acquired during marriage community, and also provide for distribution of community assets to the surviving spouse if the other spouse dies while married. You can carve out specific items of property as separate in such an agreement, too. E.g. my husband and I provided that our retirement accounts are separate property in case of separation or divorce.

So, I recommend you see an attorney now to write up the ownership of this property you are planning to acquire, and return after marriage to get a three pronged community property agreement in place.

Congrats in advance on your likely engagement, too.
posted by bearwife at 1:24 PM on July 5, 2012

You need to proceed as if you had no thought of getting married. Do what KathrynT describes above, and run the contract by a lawyer.
posted by wryly at 2:39 PM on July 5, 2012

We bought together with no trouble and then, a year after the wedding, the deed was transferred from {him} + {her} to {him + her}. That is the easy part. The more business-ish stuff is something else entirely, and the lawyer recommendations seem on-point to me.
posted by acm at 5:17 PM on July 5, 2012

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