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#2178705 - 05/18/18 03:27 PM Business or Consumer?
Anonymous
Unregistered

Parents loan borrower money to purchase a rental 3 years ago.

Borrower now taking cash out of the rental to repay the parents. There is no formal loan agreement between the borrower and parents and no other debt owed on the property.

Would this be business or consumer purpose?

I'm leaning toward consumer but it was treated as business and no LE was provided.

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#2178743 - 05/18/18 05:05 PM Re: Business or Consumer? Anonymous
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
I don't see a business purpose. The borrower is not purchasing, improving or refinancing a rental. They are taking cash out to repay a personal debt they owe their parents.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#2179034 - 05/21/18 09:17 PM Re: Business or Consumer? Anonymous
fmissle Offline
Diamond Poster
Joined: Jul 2007
Posts: 1,016
Pac NW
I might be swayed that it's a business purpose transaction, perhaps depending on if the Borrower has other rental property or has rents as a significant portion of his/her income. The loan from the parents could still be considered a business purpose loan which was used to acquire the investment property, like a hard money loan.

I don't know... maybe not.

I think if the loan were not from the parents, I could justify a business purpose. As you explained it though I guess I end up on the same side as Dan.

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