NEW: BP Podcast 66: Flips, Apartments, & Protecting Yourself From Professional Tenants with Michael Blank

Hide this

From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1514 topics, 14400 posts — Last Post 04/19/14, 09:48AM

BiggerPockets Exclusive PRO Area

117 topics, 839 posts — Last Post 04/18/14, 05:47AM

New Member Introductions

10891 topics, 85656 posts — Last Post 04/19/14, 09:59AM

Real Estate Success Stories

396 topics, 6158 posts — Last Post 04/19/14, 08:32AM

General Real Estate

General Real Estate

Buying & Selling Real Estate

5938 topics, 46791 posts — Last Post 04/19/14, 09:53AM

Renters

643 topics, 5817 posts — Last Post 04/19/14, 09:29AM

Get Foreclosure Help - Help Stop Foreclosure Forum

316 topics, 2557 posts — Last Post 04/16/14, 03:58AM

Home Owner Association (HOA) Issues & Problems Forum

237 topics, 1609 posts — Last Post 04/17/14, 08:53AM

Do it Yourself

654 topics, 6264 posts — Last Post 04/19/14, 01:54AM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3682 topics, 29493 posts — Last Post 04/19/14, 09:59AM

Real Estate Guru, Book & Course Reviews and Discussions

1133 topics, 11558 posts — Last Post 04/18/14, 11:03PM

Ask About A Real Estate Company

740 topics, 7318 posts — Last Post 04/18/14, 11:52AM

Real Estate Investing

Real Estate Strategies

Wholesaling

5603 topics, 43743 posts — Last Post 04/19/14, 09:55AM

Rehabbing and House Flipping

3334 topics, 31000 posts — Last Post 04/19/14, 09:37AM

Real Estate Development & New Home Construction

553 topics, 4683 posts — Last Post 04/18/14, 10:25PM

Innovative Strategies

703 topics, 6027 posts — Last Post 04/18/14, 08:48AM

Tax Liens, Notes, Paper, & Cash Flows Discussion

866 topics, 6678 posts — Last Post 04/19/14, 06:06AM

Rent to Own a.k.a. Lease Purchase, Lease Options

692 topics, 4881 posts — Last Post 04/19/14, 10:00AM

1031 Exchanges

143 topics, 1054 posts — Last Post 04/18/14, 08:41AM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1686 topics, 11286 posts — Last Post 04/19/14, 05:56AM

HUD, VA, and Tax Sales

414 topics, 3089 posts — Last Post 04/18/14, 12:05PM

REOs

1214 topics, 10575 posts — Last Post 04/19/14, 08:59AM

Short Sales

1534 topics, 13120 posts — Last Post 04/17/14, 04:44PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7202 topics, 70751 posts — Last Post 04/19/14, 09:38AM

Mobile Homes & Mobile Home Park Investing

638 topics, 5141 posts — Last Post 04/19/14, 09:49AM

Investor Basics

Starting Out

7700 topics, 60446 posts — Last Post 04/19/14, 09:59AM

Investor Psychology

431 topics, 6104 posts — Last Post 04/18/14, 06:08PM

General Real Estate Investing

4718 topics, 37196 posts — Last Post 04/19/14, 09:58AM

Real Estate Investor Marketing

1731 topics, 14094 posts — Last Post 04/19/14, 06:39AM

Commercial Real Estate

Commercial Real Estate Investing Forum

1410 topics, 8985 posts — Last Post 04/18/14, 10:17PM

Multi-Family and Apartment Investing

1109 topics, 9229 posts — Last Post 04/19/14, 09:27AM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

642 topics, 4897 posts — Last Post 04/19/14, 09:18AM

Business Basics

Goals, Business Plans & Entities

831 topics, 7562 posts — Last Post 04/18/14, 04:25PM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2785 topics, 20005 posts — Last Post 04/19/14, 05:28AM

Property Insurance

309 topics, 2045 posts — Last Post 04/17/14, 07:41PM

Personal Finance Discussion

328 topics, 2731 posts — Last Post 04/18/14, 04:33PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2833 topics, 19697 posts — Last Post 04/19/14, 09:27AM

Creative Real Estate Financing

1209 topics, 8769 posts — Last Post 04/19/14, 06:24AM

Crowdfunding Real Estate

35 topics, 461 posts — Last Post 04/18/14, 05:17PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1210 topics, 7989 posts — Last Post 04/19/14, 08:04AM

Bankers, Lenders, and Mortgage Brokers

441 topics, 1922 posts — Last Post 04/18/14, 09:39AM

Contractors

268 topics, 1678 posts — Last Post 04/19/14, 03:38AM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

1989 topics, 11610 posts — Last Post 04/19/14, 09:47AM

Americans & International Real Estate

161 topics, 566 posts — Last Post 04/14/14, 11:19AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

64 topics, 428 posts — Last Post 04/18/14, 04:22AM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

15016 topics, 53955 posts — Last Post 04/19/14, 08:55AM

Real Estate Events and Happenings

164 topics, 2511 posts — Last Post 04/19/14, 09:35AM

Off-Topic

Off Topic

Off-Topic

2905 topics, 32411 posts — Last Post 04/19/14, 08:03AM

Housing News & Real Estate Market

914 topics, 8351 posts — Last Post 04/17/14, 08:41AM

BiggerPockets Real Estate Investing Summit

97 topics, 1751 posts — Last Post 04/10/14, 02:27PM

BiggerPockets Resources

Forums » Landlord & Rental Property Questions » Best way for my son to buy my house & I rent from him.

Best way for my son to buy my house & I rent from him.

7 posts by 5 users

Signup


My son wants to buy my house from me & I will rent from him. This way I can retire & move back home, as I had to relocate for work.He would owe about $44,000. What is the best way to go about the sale, an attorney to over see the whole thing?
The house has been listed with an agent so he would have worked for 2 yrs for nothing, but I really can't afford to pay several thousand either. Your views, please.



Real Estate Investor · Salem, Oregon


What is the value of the home, and what is the loan amount & interest rate if there is one? Do you want to be off the mortgage? Do you want to make a profit? Can your son qualify for conventional financing. There are a lot of variables. We will need more information to give you a informed opinion.




I bought it for $113,000 in 2005. It's worth about $85 now & owe
$64. He was looking to help me retire & as a help on his taxes.
There would be no trouble with the financing. He would have to put 30% down & that's no problem. I want this to be fair for both of us.



Real Estate Attorney · Dallas, Texas


What are the issues that make this different from a normal buy/sell agreement? Is your son going to get a conventional loan to buy the house or is he getting a loan from you?

If you are going to accept less money than the house is worth, the IRS will look at this as a gift from you to your son. The gift tax rules would then apply. A similar situation arises if you give him a loan (or he does some sort of payment plan instead of paying 100%). In that case, you would need to make sure the loan meets the IRS guidelines for a family loan so you can avoid the gift tax issue.

As far as the lease goes, the same idea applies. If you are going to pay rent which is normal for the area, you have no issue - just do a normal lease. But, if you are going to pay less, your son could run afoul of the IRS regarding a gift (same applies if you pay more rent, but you would be the gifting person). I have not researched this situation though, so I do not know how this is exactly handled -- I just know that you need to pay market rent to avoid it.

I am not sure how your state handles taxes to know if there is an issue.

As far as the realtor goes - I guess it all comes down to your written listing agreement. What are those terms and how long does it last? I've never signed a listing agreement that lasts more than a year, so I would think there is no formal problem regarding avoiding the seller's commission. If you feel bad about it, you might offer up lunch or something.



Real Estate Investor · Salem, Oregon


How much longer is left on the loan?

In my opinion.... You should carry the note yourself. Sell it to him for the full appraised value, but then "gift" him a max of $12000 a year (to avoid gift tax) till it reaches the loan amount. Def. have a lawyer & CPA who are familiar w/ estate taxes write it up for you.
Then to rent it back.
Come to a agreement on how much you will pay, and how much he will pay. Then have him rent it to you @ market & then he can gift the balance to you every year. Its a bit convoluted, but tax planning tends to be.
Understand I am not a lawyer, nor have I ever done this. But it makes sense to me.



Real Estate Investor · Baltimore, Maryland


Carolyn - what exactly are you trying to accomplish by this transaction?
Did you realize that if you were to start missing your rent payments (for whatever reason), your son is going to be on the hook? Not only this may hurt his credit, but also put you and him in the uncomfortable position.
(I am not saying you will miss payments, but what if?)



Rehabber · Minnesota


Addressing only and exactly what you put in the O.P.:

You asked how to do the sale. If between you and your son, you can do it with just a r.e. attourney and save some significant fees. This is ONLY for a case like this where both parties feel 100% safe and certain of no issues. Although for his financing, if conventional, you will have to follow with the cavets of his financing co., like title insurance.

As for realtor:
It's business. You say he would have worked for 2yrs without pay. You can also see it in the light that in 2yrs he has not gotten the job done either. It is what it is, you gotta take care of you. Hey, if the realtor got it sold but 20K below what you need, do you think he would have cut his commision in half to give you more cash? It's a personal choice if you want to donate to the realtor.





Sign up