Thank you. I am arriving at the same conclusion that we can't be co-owners of a rental property without being on the deed. However, we don't want it to be a loan with a simple interest rate. Is there any reason why this can't just be drawn up as a simple business partnership where we front some cash in return for an agreed upon split of expenses and profits? A contract would clarify the terms of our agreement, including upon disposition of the property itself. We would try to design it such that the risks and rewards were shared relatively equally.
I'm confident that the business agreement would not be that difficult to construct. What I struggle with is how each side of this transaction would report the various cash flows in TurboTax. For example, if we paid $100,000 to be a partner in the rental property business, would my daughter report that as ordinary income or would it be a debit to the business partnership against the home's equity and not be reportable until final disposition of the property? Payments of profits to us would be expenses to the business partnership?
Alternatively, we could make the up front payment a loan with low interest rate in return for some smaller split of profits but that seems more complicated and does not reflect the intent of our business venture.
I would think this is not an unusual situation where a child has a house and is moving up or moving to a new area. Property has characteristics to make it a good rental option and a parent, friend or sibling decide to jointly invest to enable that rental rather than just sell the property outright and lose the opportunity?
