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I'm assuming condo/co-op boards don't take into account outstanding personal loans as part of assets??
ie I loaned a family friend 300k.. so that amount isn't on my bank name, despite having contracts etc, showing he's paying loan on-time, etc.. thanks.
You can list it under "Other Assets" (Schedule D) on the REBNY Financial Statement. As long as you provide suitable documentation, the Board will probably give the loan some value, although they will apply a haircut in accordance with their particular policy for high-risk assets.
Are you paying income tax on the interest on your loan? If not, you are better off locking the loan docs in a safe somewhere....
And if your 'friend' knows you are not declaring the Interest as income on your 1040, that's a pretty big hammer against you if things go bad.
But I'm sure you wanna be forthright with the coop board and let them know if you are a tax cheat.
And btw as a prior Sherpa to an Accting firm way way way back... Don't mess with the IRS and $10k in undeclared loan interest income. It gets hairy....
Don't mix money and friends.
Are you trying to make your overall net worth look better? As in the "missing" $300,000 would make your overall application look better to a board?
I'm afraid that would not work - most boards would disregard that as an illiquid asset, and if anything a liability. You can't just withdraw such a loan - or even sell it on the open market. At the most I think you could establish a possibly shaky income stream with full documentation - but not an addition to net worth.
yes i actually wasn't planning on adding it, since i figured boards would disregard it (i know i would for my prospective neighbor, but never been on a board)..
1099/1096's in order holla
It is your call. It is out of your hands, so technically it isn't on your balance sheet. It depends on what sort of percentage it represents how it might read to a board. I'd be concerned if someone loaned a meaningful percentage of their net worth out - I would think that the loaner was not a fiscally prudent person (however well meaning and intentioned said loan may truly be). If however it were a very small portion, I think you might establish that you are a charitable individual. But my gut reaction is that it opens a can of worms for discussion... And that is never a good thing.
Generally we have issues with inflating net worth on applications - deflating is a new one!
This is actually a somewhat nuanced problem.
The main consideration for you is: Is the board going to find traces of the loan? I.e., if they're going to pull three months' worth of checking account statements and see the interest income coming into your checking account, you probably want to establish the existence of the loan to justify the weird income stream.
But as W67 points out, if you're charging interest, that ought to show up on your taxes, and if it doesn't, that's a big hairy board problem.
This loan is probably nothing but a negative for you, application-wise, but if you're stuck with it, you might have to try to get out in front and spin it as "defender of the tribe around you during the recession" or somesuch.
DG Neary Realty