Family partnership in vacation property
My wife and I along with three people in our family are considering purchasing vacation property. In doing so we are thinking to form an LLP or LLC.
But we were thinking that since one partner does not have a first mortgage she could consider this property her primary residence and apply for a primary residential mortgage loan, which most likely would be offered at a lower interest rate and require a lower down payment than if it were purely considered a vacation home. All partners would have equal share in the property and pay their equal share of the loan payment, taxes and expenses. I would like to know if this is possible and what the tax implications are for the partners going into this? Also we intend not to rent the property during the first two years, but would consider doing so later on. I’m not even sure if we are approaching this the right way, but wondered how all partners could have some tax benefit in this? Any suggestions or advice on this would be appreciated.
Regardless of the tax advantages of holding investment rental property in a Family Limited Partnership, your financing approach smacks of loan fraud.
Never lie on a loan application. If you are using the property as a rental, then apply for financing as an investor. Penalties for loan fraud on a federally insured loan include prison time and a fine up to $250K.
The tax advantages that would accrue to the partners in a FLP or LLC, are dependent upon each partner's personal situation.