1.5 Mil. Option Opporunity – Advice requested

November 6, 2008 at 11:25 am

William Brandon

Hello

I have a opportunity to structure a OPTION deal on a $1.5 million dollar water front property, but require advice on how to make sure I get paid & get this to work. Listed below is the summary.

1. Brother (A) and Sister ( own and are on the mortgage together.
2. Brother lives in house and Sister does not. Sister pays $4k monthly to brother for her half of mortgage. Sister wants out and off mortgage.
3. Brother (A) is willing to start paying full mortgage payments and release sister ( from obligation of paying $4k monthly and she is willing to walk away from any equity.
4. Brother (A) doesn’t want to REFI because of fees and he has a great rate (30-yr straight).
5. Sister ( currently leases the home she is in.

Here is what I propose but need help if the idea is correct or better yet need a better idea that will work, becase after two years, they are ready to work also.

1. Do Lease Option & tranfer title to Brother (A) at current loan balance and brother (A) keep all armoratization. Releasing sister from obligation of paying $4k monthly.
2. Have Sister ( (a successful Dentist) open a R/E Management LLC where she can write off a $4k monthly loss moving forward if structured properly after a monthly paper shuffle and also release previous losses on next years income statement as well because she wouldn’t be limited to $25k annual write-off.

Result:
1. Brother keeps house w/out REFI
2. Sister gets to show a $4 monthly loss moving forward so she can reduce her taxable income. ie – her caveot to work with brother because she essentially increases her income

Question: Will this work and is it legel, if not how can I make it work and get a percentage for putting together the deal?

Thank you for your help.

Dan