Profile picture for rlopes90000

co-owner of a property, other owner wants me to co-sign on another property

I own a property with my Sister. She wants me to co-sign on another property. She will cover all the cost. The property is being offered to her @ $140,000, the property will be listed @ $160,000. The house is already rented out. The mortgage including PITI will be $1040. The rent is $1100. Will this effect me if i wanted to buy another property on my own. What are the risk.
  • July 13 2011 - Cypress Park
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Answers (10)

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Profile picture for COREXRE
Any time you 'co-sign' a financial document you take on a further obligation and as pointed out in prior replies ..... and you are potentially responsible for that obligation as a co-signer.  And yes - it may well affect any future purchases that you may have for yourself and your family ..... as well as your credit rating, etc.  I would recommend thinking this one out very closely!  Meking a decision to co-sign could habve long term financial implications for you personally!
  • July 14 2011
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Profile picture for RyanGuzman
Buy as many homes as you can, that is how you build ultimate wealth.  But this home is not a great investment.  If you are buying for 140 what makes you think you can sell for 160.  the market is telling its 140.  theres also no cash flow and the profit margins are very low.  this home is  not a great investment.
  • October 06 2012
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rlopes 9000,

That was a wonderful comment which we do not experience that often. Thank you and you are welcome. Best wishes.

Happy funding, Rudi
  • July 15 2011
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You should want to make more of an income on a rental property these days as they are practically giving homes away in a lot of cities at 75% off of the prices of just a short 5-6 yrs ago. Yes, it would also affect your debt to income ratio when you try to qualify for a home other than those two. You are also responsible for the mortgage payment if the tenant or she doesn't make the payment. You should be looking at homes that you can double your mortgage payment in rent as an income property investment...
  • July 15 2011
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co-signing is no different than buying it yourself...you are entirely responsible for the note payment should your sister not remit the payments. 

the rent you mentioned ($1100) is a little light to make this property a good investment at $140k.   if you can bump   the rent a hundred or so it gets juicier.   if the property you own with her now is a rental you already know that even a single month of lost rent or a few thousand dollars of renovations (or BOTH...yikes)  will have you in the red.  a carefully drawn partnership agreement can treat the question of who covers what and when and how rapidly. a vacant unit gets spendy very fast.

in defense of the deal you have an existing relationship with sis so you are well aware of her financial capabilities and reliability.
  • July 14 2011
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Profile picture for rlopes90000
  I am extremely surprised and very well pleased by all the answers submitted to this question. You are all greatly appreciated. I wanted to take the time to recognize all of you for your precious time and excellent advice. It was a shame that i could only pick one answer as the best.  This a great site that i will not hesitate to use again.
  • July 14 2011
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This will absolutely effect your future buying power by raising your DTI. In addition to that if anything was to go wrong you would be financially responsible. I would be very cautious of this transaction. 
  • July 14 2011
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This will be counted in your Debt-to-Income ratio if you wish to purchase another property. You would need the income ability to cover  payments for all three properties and 6 months reserves on the rentals and 2 months reserves on your primary residence. The risk is if she defaults you are on the hook.

Happy funding, Rudi
  • July 14 2011
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Profile picture for wetdawgs
The risks:  should she default, the mortgage is fully on your shoulders and the debt will be counted against you should you wish to buy another property (even if she doesn't default).

In other words, my response to the sister would be "are you nuts?  No way!".

  • July 13 2011
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I would contact a lender before you consider a commitment like that.  They will need to run your debt to income ratio.  You may not qualify to buy another property on your own if investing on another home with your sister will max out your debt.  Good luck!
  • July 13 2011
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