what am i doing wrong

[fernfurn]

we want to buy another (X) house that is going up for sale but havent sold ours yet. My partner has his up for auction in a very good suburb which will sell. I cant figure out what I am doing wrong here, but here is my scenario.
I use an existing line of credit I have to buy X house at say $400k, partner reimburses this to me when he sells, so my line of credit is paid off. When our house sells, he takes the $400k out of the sale price so he gets his money back, but then we are short by $400k. Is it because X house is still paid off. My brain goes quite mushy when faced with high finance, can anyone explain this to me?

 

[cmason]

I work out the end result being house X fully paid and your partner has $400K from the sale of his property.

If I understand correctly there are 3 properties involved for simplicity lets say they are all worth $400K. For simplicity ignore the LOC as it gets paid back, so effectively:

1. Starting position own 2 properties P1 worth $400K and P2 worth $400K
2. buy P3 for $400K and sell P1 for $400K, these cancel each other out as in your scenario LOC paid for P3, sale of P1 paid off LOC
3. sell P2 for $400K, proceeds go to partner paying back for P1

end result I see(assuming no loans were involved) P3 fully paid off and partner has $400K effectively sale proceeds from P1

Does that sound right?

 

[Colin Rice]

You gave partner 400k LOC to buy house, he sells his place and repays you, you then sell your place and as the LOC is secured against your place it will be paid out at settlement.

Thats where it ends.