Legal Question in Real Estate Law in California

As to (1), owning real estate always has tax consequences, including the payment of property taxes twice a year while you own the property, and likely capital-gains tax on your profit when you ultimately dispose of the property. However, these are generally not reasons to buy, or not to buy, property; they are just factors in the equation. Your question does not really state why you would become involved with this property at all, whether there is a lender involved which may be upset if ownership is transferred, etc.

So, this leads to (2). Your question does mention some of the "mechanics" of the proposed transaction (but very little); and nothing at all about the reasons why you would want to do this. All of this makes it difficult to advise you, and the temptation is to say don't get involved, it's full of risks, you have too little experience, etc. - but who knows?

One thing I'd certainly steer clear of is any change of ownership right after a close of escrow where a lender has provided purchase money. Loan transactions usually contain clauses severly restricting the right of a homeowner to sell the property, or any interest in it, without prior approval of the lender -- which it may or may not give, or for which it may charge a loan modification fee.

Another problem would arise if your friend tried to add your name to the purchase contract. If the purchase contract is signed and in escrow, modifying it in any way would be difficult and require the cooperation of the seller and any lenders. I doubt that this is literally what you mean, however.

So, I'd suggest caution, including getting advice from someone with knowledge in the real estate investment arena.

IT SOUNDS LIKE LOAN FRAUD TO ME.

I posted that response to a similar question the other day, and many attorneys disagreed with me. When I say it is loan fraud, I mean that it sounds like you and your friend are trying to structure the purchase of real property, with a loan secured by a deed of trust, that you do not qualify for.

A conveyance of property from someone subject to a deed of trust, will most often trigger a "due on sale" clause contained in the deed of trust. That means if the lender finds out, they will want all of their money, or else they will foreclose. Additionally, if the application for the loan indicated that your friend was going to occupy the property, and instead you were, the lender may want to sue you and your friend for fraud. Lenders do not appreciate being misrepresented into the status of a puchase money mortgage, which limits their rights to pursue the defaulting purchaser for a deficiency judgment. The courts have clearly stated that lenders are not barred by Code of Civil Procedure section 580b from pursuing the borrower and others for fraud.