Dear Mr. Feichthaler:
I am considering purchasing a rental property and borrowing the majority of the purchase price from a third-party, non-conventional lender. The interest rates aren't great, but I believe I am getting a great deal. The lender is asking for my wife to sign the note and mortgage, even though the property will only be in my name. Basically, the numbers work as long as I can deduct the interest. Can I? And should I have my wife sign?
- Edwin B.
I am pleased to hear you have found a good deal on a property. They are still out there, but take a bit more searching than a few years ago. Generally, investment interest is deductible for federal income tax purposes. As with any financial advice, you should seek the professional services of a CPA or attorney how deductions apply to your specific situation.
The lender would like everyone possible to sign and commit to repaying debt, so it is natural for them to want your spouse to sign. However, if the property is in your name only, and the property will not be your homestead, it is not required to have your wife sign. I would only sign individually. If there is any issue with repayment, the lender can only pursue you, not your wife, for repayment of the loan. For additional asset protection, you may want to title this property in a Florida Limited Liability Company. If debt or judgment occurred relating to the property, your maximum liability may be your investment in the property if you have an LLC. If it is in your name, your personal assets could be seized to pay the debt. Finally, always carry enough insurance on the property, along with a personal umbrella policy, to protect against any unforeseen circumstances.
Eric P. Feichthaler has lived in Cape Coral for 28 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continued his service to the community through his chairmanship of the Harney Point Kiwanis Club KidsFest from 2011-2015, which provides a free day of fun and learning to thousands of Cape Coral families, and funds numerous scholarships. He has been married to his wife, Mary, for 14 years, and they have four children together. Recently, he earned his board certification in Real Estate Law from the Florida Bar. He is also a Supreme Court Certified Circuit Civil Mediator.
This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.