investment property with family question

Unless your father is moving in with you, this is probably not a good idea. Business and relatives do not mix.

If he dies is he willing the property entirely to you?

Money received from rent is ordinary income. If you deposit the money into your account, it is your money.

Since you are 100% obligated for the loan and payments (you and your father are both 100% individually obligated and liable for the entire debt), anything you buy in the future will always be affected by this purchase.

I doubt the rent for that place will cover the mortgage and expenses. So you will be further dumping money down a bottomless hole. Renters typically destroy a place. You may (will?) also have problems collecting rent. Any problems with the place will be your problem. Have you ever managed a rental property before?

What would be quicker and easier for you is to take 50% of your current income and light it on fire each month. You get the same result without the midnight calls for stopped up toilettes.

Referring to it as an investment is misleading. It's not so much of a business proposition from my father as it is a gift. He originally wanted to give the money for us to renovate our current house. It seems silly for me to spend money on signification renovations on the current house when I see what my money can now buy in the market. Selling the starter house is a bad idea because I qualified for 30k in loan assistance from the county which would have to be paid back in full if I sell the house now; I would prefer to rent out the current house long term rather then sell it. I don't want to miss out on the great housing deals now and feel like this idea has some merit.

Much of what you're asking hinges on what name(s) are on the Deed of the new property, have you given this any thought?

My father has no interest in the property other than to see it go to me. Is it possible for only my name to be on the title even if he is co-signing the mortgage?

Quote from barom : Referring to it as an investment is misleading. It's not so much of a business proposition from my father as it is a gift. He originally wanted to give the money for us to renovate our current house. It seems silly for me to spend money on signification renovations on the current house when I see what my money can now buy in the market. Selling the starter house is a bad idea because I qualified for 30k in loan assistance from the county which would have to be paid back in full if I sell the house now; I would prefer to rent out the current house long term rather then sell it. I don't want to miss out on the great housing deals now and feel like this idea has some merit.

I'm sorry to say it, but you need to just stop. Read up on real estate investing and basic cost benefit analysis. This IS an investment. So wake up and do you homework. Don't go based on feeling go by the math.

Quote from gunit00 : I'm sorry to say it, but you need to just stop. Read up on real estate investing and basic cost benefit analysis. This IS an investment. So wake up and do you homework. Don't go based on feeling go by the math.

gunit00, I will eventually grow out of my current house and have to move. Passing up on this opportunity is simply throwing money away. Mortgage, insurance, taxes come to less than 1000 on my current house and I would have no problem renting it out at 1300 right now. I would be willing to take some losses on the new house month to month to ensure a quality renter who will take care of the property.

If you just want out of your current house and into a new one right now, I can see doing this. if you do get the new one in your name though, and later need to short-sale the old house, they are going to look at the new house and if there is any equity, it will affect or even stop the short-sale.

If that is the case, have your father buy the new house entirely in his name. You can move in and wait out the time frame for the $30k loan assistance and then get rid of the old house. How much longer do you need to wait?

Also talk to an attorney about the $30k loan. Is it possible to get out of this if you get rid of the house?

I would hate to short-sell the current house. It's only upside down by about 10k and I've got less than fifteen years of payments left. The 30k was deferred for the first five years of the loan and then amortized over 30 years (its ~$80 a month). My wife and I live quite frugally and I have a sizable safety net that would allow me to make payments on both properties (if a second one was purchased) for over a year if we were to go without renters before having to worry. I really appreciate all the input :-)

Quote from barom : I would hate to short-sell the current house. It's only upside down by about 10k and I've got less than fifteen years of payments left. The 30k was deferred for the first five years of the loan and then amortized over 30 years (its ~$80 a month). My wife and I live quite frugally and I have a sizable safety net that would allow me to make payments on both properties (if a second one was purchased) for over a year if we were to go without renters before having to worry. I really appreciate all the input :-)

This is the thinking that bankrupts a lot of people. It makes no difference at all what you paid, how long you have been paying or how much is left to pay. The house is worth less now than you owe on it. It was, is and always will be a bad investment. Cut your losses and get rid of it. Is the $30k an actual loan that you are paying a governmental entity in addition to your regular mortgage payments?

If you truly can rent this place for more than the mortgage, and really want all of the many, many headaches that come with being a landlord, perhaps that is a solution. But this is still a bad investment.

The 30k note is held by the same company that holds the primary note. I understand where you are coming from about the bad investment, but I see no reason to walk out I the current house as I can easily make payments on it or rent it out above cost.

with the money he is giving you plus your safety net, how close would you be to paying off your house? <5 yrs?

http://boss.blogs.nytimes.com/200...nvestment/

As you will not be occupying it immediately deems it an investment property, despite your future intentions.

I would be more concerned with what contingencies you and your father will have in place for the cost of maintenance, potential rental loss, etc. These are indeed the things that put strain on family members investing in property together.

In respect to both names being on the mortgage and then you occupying later on, no, the lender does not care and when they did find out they would be happy to see the collateral owner occuppied instead of the riskier non owner occuppied collateral loans they hold. Consult your attorney as to how the title should be held as Estate issues are definitely a concern here (especially if you have siblings).

I am not a CPA but as a mortgage professional have seen plenty of tax returns and when there is rental income (or loss) to be declared on a Sched E it can be split between the parties any way they choose as long as the combined figures equate to accurate actual amounts. I have seen some family members go 50/50 , some go 25/25/50 (when 3 members with different interest) , some switch off from year to year on who files the Sched E, etc. Consult your CPA and they will best advise you.

As far as complicated with two family members, I do not see the actual transaction to purchase an investment property that complicated; just the issues of placing family members in this co-ownership situation is what I see as very uncomfortable in most cases.

Good luck; -Adam