Buy Parent's house?
Short story is that I've been taking care of various family members for quite a few years and have no income or credit. And even though neither of my parents is in any position to take care of their rental property (previous home) well, there is still some resistance to selling it outright.
What I intend to accomplish by buying parents house...
- Defer their capital gains
- Real estate investing experience for myself
- Income & credit for myself
- Get them out of property management
The terms I've worked out to buy the house... It 3BR/1.5BA 2+GA on 1 acre 1977
- Pay appraisal value (guestimating around $180,000)
- Wrap around seller financing at 3% 30 years $25,000 secured & the balance unsecured.
- Seller continues to pay on existing $34,000 mortgage
- Current tenant rents for $1000/mo (2 years)
- Expenses are taxes $3300, insurance $750, water softener $60/mo, maintenance & repairs $50/mo, miscellaneous $15/mo.
- NOI $540, Cash flow $90 (interest only first year) -$210 (PI after first year)
What I intend to do after buying the house is a bit unclear. It's a 3BR/2BA 1500sqft on 1 acre with 2+GA built in 1977. There's plenty of deferred maintenance & even though the septic works fine, it'll have to be changed to a mound ($15,000) in order to sell. Assessor says it's worth $233K and maybe it could be after a good renovation, although I think $220,000 might be closer.
I've mostly determined that selling within the year is my best bet, and keep the unsecured note in place to invest in other rental property. Does anyone see any huge gaping holes in my plan?