# Making a Association and so I can get 5% down to purchase a house



## papucho (Oct 22, 2013)

Hi I'm recently interested in buying another house but when I went to the bank they ask 20% of down payment and 80% borrowing of my property value... now the question is, how do i go around in order to purchase a house for business and hope i get 5% down payment by creating an Association (maybe 3 or 2 people in it) any idea if that could work? thanks


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## Just a Guy (Mar 27, 2012)

In most cases it still won't work. The bank wants 20% down on rental properties. It doesn't matter who, or what owns it. It's what the property is being used for that matters. That being said, they aren't always against you borrowing that 20% from somewhere else.


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## Mall Guy (Sep 14, 2011)

what just a guy said . . . they will still want 20% down, and want everyone involved to guarantee individually . . . may even want a higher DP, because of the risks of a partnership dispute . . .


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## MoreMiles (Apr 20, 2011)

You have a few disadvantages. The mortgage will be harder to get as all partners need to be approved. Your house will not qualify for capital gain exemption as it is not a primary residential residence. To do this properly, you do not want an association... you want a LP. This way, you are not responsible for other people's default / debt.

You can read more about RELP.
http://www.investopedia.com/terms/r/realestatelimitedpartnership.asp


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## Mall Guy (Sep 14, 2011)

. . . _A Real Estate Limited Partnership is typically organized with an experienced property manager or real estate development firm serving as the general partner. Outside investors are then sought to provide financing for the real estate project, in exchange for a share of ownership as limited partners_ . . . in another thread they are call League Asset Corporation! Based on the original question, I think we are missing the "experienced" part. And it would be a pretty complicated structure just to buy a single house (annual filings, etc.). 

OP with only 5% down, does a property have positive cash flow ? Do you have cash to do repairs, carry the property while vacant ?


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