Ok here is the scoop…Your are going to help out a family member whos credit needs some work and who can’t qualify for a home loan…
Your combined net income is 250k- you have great credit. You offer to go into a deal with a family member, to help them get into a house sooner than next year . You offer to give them 20% down for a house in the most desired area of the city-you’ll make money if you have to sell… You are the main borrower, and a non accupant of the house… Here are my questions..
1)Can their name be on the title?
2) If the lease to own payment is the same as the mortgage payment is that earned income from the property?
4)Say you buy the house for 200K and after 2 years when they are ready to purchase the assested value is 250k - can it be sold for the original purchased price?
5) How is it claimed at tax time as an investment property if it is not making money just enough to cover the property tax and the mortgage payments?
Thanks
R1 said:
Feb 01, 09 at 5:44 pmI’m not a CPA so please consult one, but I can answer some of your questions:
1) Yes, anyone and their mother’s name can be on title to the property, however you probably don’t want their name on title until the very end as title is an asset, mortgage is the liability. So if you are on the mortgage but not on the title, you have no ability to handle the asset but all the responsibility of making the payments. You can add them to title with a very, very small share (say 1%) after you close on the property using a warranty or grant deed, talk to your closing attorney about filing the necessary paperwork after closing.
2) If you are claiming the property as a rental, you and your CPA should be able to show that as a loss on an annual basis as any allowance you may qualify for regarding maintenance would still allow you to show negative cash flow.
3) You can sell the house for whatever you want to sell it for. You can lose it in a poker game. It doesn’t matter. Your bank will want to be paid off in full, and however else you handle the disposition of the property is between yourself and the buyer. Taking the loss on the equity you would forego is much harder to prove, but you can sell it for what you bought it for or even less.
4) The Majority of "investment" properties in the USA are cash flow negative, or "negatively geared", and most of them are money pits, but that’s besides the point. Very few people earn cash flow monthly on investment properties, most show a loss and take the tax writeoff their CPA determines they qualify for, deciding to try to make money by gambling on the appreciation of the property over time.
Good Luck
RRR said:
Feb 01, 09 at 11:39 pm1) Yes
2) Yes, but then you have the Mortgage Payment to etc as expenses to offset.
3) Yes (just be sure you get enough to cover closing costs & pay off all liens)
4) It still is claimed as an investment property.