Holding Title

I am a relatively new investor and I could use a bit of advice…thanks in advance!

I am investing with 2 relatives and need help deciding how to transfer title/ get my fair share legally/ not upset the tax man.

  1. BOUGHT home by loaning my mother 20% down on a new home in CA (plus closing, hardscaping, paint etc ) Plan was for her to live in the property 1-2 years and we would sell and split the net profit 90/10 (90 to my wife and I as we put up all the money and work). Mom bought the home solely in her name… She now does not wish to live there alone and I am going to need to lease the place out for the next 10 months to satisfy the builder’s agreement + STCG/LTCG. Can I get away with just a Quit Claim or Grant Deed? What is the best way to deal with this for legal and tax purposes?

  2. BUYING a house in Florida with my brother. He will O/O and I plan to have him be soley on the loan. In this case we have agreed to a 50/50 split. I have other irons in the fire and don’t wish to be on the loan if possible. What are my best options as far as vehicles go?

Should I look at trusts? Partnerships? Inc?

Should I worry about equity trans appearing as gift funds?

How can I make a contract to ensure I not only get my share of the profits, but also get my Down, CC’s and property improvement money back?


reading your post it sounds like you are not on the title. your acting like a lender and just giving money to pay for the property. If you haven’t done so, try and get the money you lent out recorded as a 2nd on the property. This way your protected.

If your not on the title, then you have no legal claim to the property, no matter how much money you put in it.

If you quit claim, the bank might call the loan and your mom is left with a large bill with no asset to back it up.

if you grant deed then up go your taxes and your mom may get it with capital gains tax issues… ---- talk to an accountant about that

Have you thought about living with her for a year?

I know moms can be a handful when it comes to you and a spouse.

Thanks! I suppose I am in need of a better strategy for the future.

I am not in possition to live there for a year as I have a home already and need to live there for 6 more months for my 2 year tax break. In additon I have some other irons in the fire, including a new O/O new construction home and …

I also am loking at investing with my brother and am in escrow in Florida on a house where I will be in the same boat. I will be the $ source etc and he will live there and make repairs.

I got into this thinking that I didn’t want to be on title so often, mainly for lending reasons. And as you know, most lenders don’t like non-occupant co-borrowers.

The up side is that I trust the relatives I am working with, but… my mother is getting older and I am not sure how to cover my a$$ if something should go wrong.

Thanks for the help!


Oh yes…

Any legal basis for just drawing up a contract with my mother and brother and having it notarized?

I can not give legal or tax advice and as to your questions you can of course for m an LLC or corporate entity but verify with a attorney or CPA in your situation to deem what is best for you.
I would use a title holding Illinios land trust since it is the perfect vehicle for allowing multilple owners of a property.
You would then setup the beneficiary interest percentages in the property per yor trust agreement since everything is negotiable.
When you setup the land trust the trustee takes the legal and equitable title to your property and thus is done legally, ethicially and of course safely.
Depending on your exit strategy you can have your tenant pay CC or whatever.
You can do a grant or quit claim deed to a relative under the law but be careful doing so as far as whomever is on title as Mr nxproject had advised is the legal owner of the property.
Just so you know land trusts protect you from liens, judgments, even IRS liens, bankruptcies, creditor charging order and so on.
If your mother has financial problems or anybody else on title or ownershipo the land trust will protect the title by way of the designated trusteee whom should be an out of state corporation for the best asset protection.
As to your Florida deal you can setup a land trust and do a 50/50 % beneficiary interest split in the trust and you can come in as a co-beneficiary or remainder agent.
The thing to remember is to use the different last name rule for a benefiicary since you are working with close family members whom may have the same last name.

There are 40 benefits to using a land trust and if you forward me your email I will send it to you.
Let me know since our company sets up land trust in our investing and we provide free consulatation to review your situation. My contact info is listed in my file…

Jay, trusts work well for this sort of thing as colvegas described above.

I have also had good results with using options.

You could buy an option from your mother for a percentage of ownership in the property with the money that you are giving them now. You can record the option, or a memorandum of option, if you want to cloud the title to protect your interest. Do the same thing with your brother.

Set the terms of the options to give you the results you have agreed to with you mother and brother.

Based on your posts, I assume they are not making payments to you on this money as if it was a note and mortgage. With the option, they also make no payments to you. The money you have advanced is the option consideration they receive for granting you the option. This is not borrowed money.

With the option approach, you are not on title to the property unless you exercise the option. You are also not a co-borrower, nor a cosigner on the note and mortgage. You have only purchased a right with the option. There is no recourse against you if something goes wrong.

When the property eventually sells, they can buy back the option from you to clear the title for the new buyer. The price you agree to accept for this should be enough to recover your investment in the option and an amount to reflect your return on this investment.

Thanks for this interesting approach.

I do have some questions though:

  1. If I do the option and give my mother, say, 10k in exchange for the ownership of the property, would I then get out of any gift taxes and/or STCG issues? And I am assuming that the 1 year for LTCGs wouldn’t start ticking until I exercised the option?

  2. You said: “When the property eventually sells, they can buy back the option from you to clear the title for the new buyer. The price you agree to accept for this should be enough to recover your investment in the option and an amount to reflect your return on this investment.”

How would that be taxed? In a nut shell I have 90% ownwership by my agreement with my Mother as all the funds for the DP, CC’s and property improvements in the deal are mine. I would be getting a large option buy back fee (80-90k). Again, how is that taxed?

  1. Would it make sense to do this “option business” in combination with recording a 2nd in my favor? I have 32k in DP and 16-18k in improvements and expenses…

  2. I will be renting the place out for at least the next 9-10 months. Will making this an income property adversly affect this stategy at all?


In my post above, I was just trying to outline an alternative strategy to give you another ‘option,’ so to speak.

You really need to get some good professional tax advice before
using this strategy to correctly structure it to your unique situation.

I understand the concepts well enough to use them in my business and investing, but I am not a tax professional, so I cannot give you tax advice.

I can say that the IRS states this (From Publication 550):

“If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. A sale or trade of a noncapital asset generally results in ordinary gain or loss. Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. In some situations, part of your gain or loss may be a capital gain or loss, and part may be an ordinary gain or loss.”

“Gain or loss from the sale or trade of an option to buy or sell property that is a capital asset in your hands, or would be if you acquired it, is capital gain or loss. If the property is not, or would not be, a capital asset, the gain or loss is ordinary gain or loss.”

“Your holding period for property you acquire when you exercise an option begins the day after you exercise the option.”

Also see:


I generally buy options from inside a self-directed Roth IRA, so I am not too concerned with the tax implications that would be present if they were done outside of the IRA. In your case, you have to be careful not to violate the related party rules if you try this strategy.

As to # 3); The more protection you get, the better for your security.
It may or may not be generally done, but I secure an option with a Deed of Trust.

My guess is renting would help you prove that the property is a capital asset for tax purposes. The longer you rent it, the stronger your case. Again, get good professional advice to be sure.

Thank for the help! Looks like I will be doing some additional reading.