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  #1  
Old 09-18-2011, 08:07 PM
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Buying a house from a parent?

Well, its about that time, and I'm scared to death.

I'm in a situation where the best option includes me buying my mothers house.
We have not talked to a real-estate agent yet, but I was wondering if there was any knowledge on the forum side of the world that could help me out.

How big of a legal can of worms does it open up to buy a house from your parent?

Are there any loopholes that this situation falls through. Some situations with this for vehicles are a tax free transfer, but I'm guessing a home buy is a different ball of wax.

Bit scary for a 21 year old, I can do anything, but boy is this spooky. I've never spent more then $2000 on any one thing in my life at this point. Spending 150ishk is astounding.
Little help?

~Nate

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  #2  
Old 09-18-2011, 08:09 PM
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Why does the situation make it the best option?
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  #3  
Old 09-18-2011, 08:15 PM
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You need a mortgage broker and maybe a lawyer, not a real-estate agent. The sellers and buyer are already connected in this case, so paying some frou-frou bint 5% commission would just be dumb.
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  #4  
Old 09-18-2011, 08:38 PM
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Quote:
Originally Posted by kerry View Post
Why does the situation make it the best option?

Gotta agree with Kerry on this one.

Having a 21-yo take on a 150k mortgage is an iffy proposition. You need to have everything clear and in writing. Is your mom going to stay there? What happens if you default? Are reverse mortgages not an option? Is the house worth what your mom wants? Is it an asset/liability you really want to take on?

IIRC, you're either active duty, guard or vet. Are you using VA or some other program? They may have special rules or inspection requirements. Or they may have special rates. Don't overlook them. If you have the option, contact your JA.

Maybe an estate planner or local real estate attorney is your best bet.

Since you asked about special circumstances, there are some listed here:
http://www.bankrate.com/finance/real-estate/7-tips-for-selling-your-home-to-family.aspx
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  #5  
Old 09-18-2011, 08:44 PM
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Originally Posted by Yak View Post
Gotta agree with Kerry on this one.

Having a 21-yo take on a 150k mortgage is an iffy proposition.
Not necessarily -- if the parents won't be living in the house, then the mortgage + taxes would probably cost less than the house can rent for these days.

If the house can be rented out at a profit, then it's a win regardless whether the 21-yo lives in it (cheaper than renting) or rents it out (a few hundred per month towards rent somewhere else).
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  #6  
Old 09-18-2011, 08:49 PM
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Originally Posted by spdrun View Post
Not necessarily -- if the parents won't be living in the house, then the mortgage + taxes would probably cost less than the house can rent for these days.
.
Not around here, nor in most places in the USA according to the Economist.
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  #7  
Old 09-18-2011, 09:01 PM
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Originally Posted by kerry View Post
Not around here, nor in most places in the USA according to the Economist.
Mortgage rates are just north of 4% these days. 5% rate of return on rental property after taxes isn't terribly difficult to do and should cover principal + interest.

(My apartment is ~4% and it's in NYC which has notoriously suck rates of return.)
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  #8  
Old 09-18-2011, 09:01 PM
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Originally Posted by kerry View Post
Not around here, nor in most places in the USA according to the Economist.
Yup, sure thought I was saving money by buying a house vs. renting. 120k Mortgage ($600 minimum but I pay $750 to pay off faster) + Taxes on 170k value ($250) + Specials ($100) + HOA ($30) + Utilities ($400) + Upkeep ($200). Total is $1730. 2 roommates cover less than half.

I could have lived in the Penthouse floors of my first place, a high rise apartment with no maintenance, pool, hot tub, gym, driving range, basketball court, unlimited secured enclosed parking, ballroom for rent, and close to everything for $1100 plus about $300 for utilities. Normal apartment was $650 a month.
http://250douglasplace.com/

Plus I'd be all by myself, and wouldn't be suffering with a 2 car garage.
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Old 09-18-2011, 09:09 PM
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Originally Posted by TylerH860 View Post
Yup, sure thought I was saving money by buying a house vs. renting. 120k Mortgage ($600 minimum but I pay $750 to pay off faster) + Taxes on 170k value ($250) + Specials ($100) + HOA ($30) + Utilities ($400) + Upkeep ($200). Total is $1730. 2 roommates cover less than half.
Could you rent out the whole property for ~$1600/mo? If you're renting it out, then there's no sense in making payments greater than the minimum assuming a 30-yr/fixed mortgage.

As far as the apartments, amazing. Something like the 1 bdr floorplans on the site would rent for $1500-3500/mo in Manhattan, depending on the area, with not so many amenities either. Not that that entices me to move to Kansas

I've seen quite a few properties that would make 7% or more profit on cash investment, but maybe that's because I'm actively looking to invest at the moment and have learned to actively ignore the ones whose rates of return will suck.

Lastly, most "buy vs rent" comparos are screwy, because they compare median rents vs median purchase prices in a given city (often for a given # of bedrooms). A better method would be to take a random sample of individual properties that have been both sold and rented in the preceding year, and average the % cash rate of returns. The first method is stupid because rental properties are often of poorer quality/lower end than those for sale.
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  #10  
Old 09-18-2011, 09:15 PM
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Originally Posted by spdrun View Post
Could you rent out the whole property for ~$1600/mo? If you're renting it out, then there's no sense in making payments greater than the minimum assuming a 30-yr/fixed mortgage.
I'm not sure what it would rent for; I'd guess that would be the ball park.

I just don't feel comfortable with debt, and I feel like getting the balance knocked down right now would be smarter than putting the difference in my investment account.
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  #11  
Old 09-18-2011, 09:20 PM
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Originally Posted by TylerH860 View Post
I'm not sure what it would rent for; I'd guess that would be the ball park.

I just don't feel comfortable with debt, and I feel like getting the balance knocked down right now would be smarter than putting the difference in my investment account.
Right, but my point was that if you got a killer job in CA tomorrow and had to move in a month, you'd at least break even on the rent vs expenses. The place isn't tying you down.
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  #12  
Old 09-18-2011, 09:20 PM
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Originally Posted by TylerH860 View Post
I'm not sure what it would rent for; I'd guess that would be the ball park.

I just don't feel comfortable with debt, and I feel like getting the balance knocked down right now would be smarter than putting the difference in my investment account.
I agree, paying down a mortgage is a smart thing to do. I did that and paid off my first house in 12 years.
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  #13  
Old 09-18-2011, 09:30 PM
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Debt sucks......

How do you spell relief??

By making that LAST damn house payment.......
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TRUMP .......... WHITEHOUSE
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  #14  
Old 09-18-2011, 09:32 PM
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Originally Posted by Palangi View Post
Debt sucks......
Given the choice between a fully-owned property and an encumbered property, but with money either in the bank or in investments, I'd choose the latter.

Debt is good if you can afford to be conservative with it.
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  #15  
Old 09-18-2011, 09:59 PM
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Originally Posted by spdrun View Post
Given the choice between a fully-owned property and an encumbered property, but with money either in the bank or in investments, I'd choose the latter.

Debt is good if you can afford to be conservative with it.
There is some truth to that during "normal" economic times, but I am sure happy to not owe on a mortgage nowadays.

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TRUMP .......... WHITEHOUSE
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BERNIE .......... NUTHOUSE
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