Helping a Relative.

16 Replies

Hello everyone, I might have a potential first deal!! Its actually a relative of mine and she is interested in selling her property since she is thinking in downgrading her home. At the moment she has a mortgage on the home. My question to you would be what type of strategy would I use to approach this? A lease option? She is not having any issues with payments just wants to downgrade. If I do take over the mortgage would that still affect her debt-to-ratio? 

Thank you all in advance for the assistance.

There's a couple things, what makes a good deal is a motivated seller that really has to sell and that's willing to do the creative deal or a low price. If you're dealing with relatives I'd be cautious about trying to force a deal. It's the existing financing the caliber of the financing means what you can do with the project meaning that if you have an ARM versus a fixed-rate give less choices. If you have existing financing you do have a due on sale clause with generally it's manageable. These include subject to, lease options and wraps.

Bottom line don't do a deal just to get a deal done, Do a good deal

Promotion
Vacasa
Vacation Rental Property Management
We do the work. You get the ROI.
We do it all for your vacation rental. All—marketing, pricing, guest requests, housekeeping & more.
Free income estimate

@Michael Baradell The reason I call it a deal because I can help someone and make some money as well. What I was planning on doing is Market the property and if the situation fits. Due a lease option, take over the mortgage, find a renter and rent out the home for cash flow. Of course I am still unaware how much is renting in that neighborhood yet.

@Brian Gibbons. I don't see it as much as forcing a deal, she came to me saying she is interested in downgrading home. Her knowing that I have been getting into Real Estate she asked. That's why I want to see on what I can do and turn this into a win win situation. Of course as investors we do have to see if the deal will profits us or not. 

Couldn't agree more, we all want to to do a deal that would be a good one :)

@al 

Al C. undefined I was just down in McAllen at the REI Expo! Give me details so we can see what can be structured.

What does she owe?

What is it worth? (where did you get the valuation?)

What is her PITI?

IS there an HOA? If so what are the dues?

Thank you Mr. Gibbons.

@John Jackson  I did not know they had any hear around the valley. Any idea when the next one will be? Would be interesting to go to one. 

At the moment I do not have the answer to all the questions just one I did look in zillow (122,254), homes.com (129,400), realestateabc (122,254), homevaluehunt sent me a report of houses around the area which prices fluctuate... I will be talking to her tomorrow into more detail about the subject. I do know that shes has had the property for a little over a year.

@Al Cordova sounds to me that she may have very little equity if any do to the fact she just purchased it. This could be the reason she is coming to you. A lease option may be her best bet to get out of the property and move on. Good Luck!!

@Brian Gibbons  happened upon a few of your Lease option YouTube videos today, ironically. Good stuff!! How much would you charge just for me to view some of your contracts? More specifically your option contract and the CYA forms you speak of. I would like to have some samples to present to my attorney so she can have an outline of what I'm looking for and make the appropriate changes to cater to my state.

@Al Cordova did you discuss Lease option with her? Even though she may have little or no equity to sell traditionally, a lease option may still work for her. She should be able to get a slightly higher Sales price than a traditional buyer would pay. Of course, this is dependent on the home appraising for that price a year or two from now. She wouldn't have to worry about paying a Realtors commission and she could negotiate that the buyer pay all closing costs. Just a thought. 

I think think of mentioning to her but then I decided not to to want her to feel like I am forcing or anything. Now that you do point it out it might be a good idea to see what she says and if she agrees well its a go if she does not well it never hurt to ask.

As for the sales price wouldn't that be determined on its FMV at the moment?

Promotion
Guaranteed Rate
Guaranteed Rate is a top mortgage lender
Save $1,290 on your next home – no lender fee*
Get special perks like $1,290 in lender fee savings when you buy a second home with Guaranteed Rate.
Apply Now

Al C.   contact David Fair down in McAllen..onestopREI.com   nice guy!

I'll probably be there win March or April to speak. 

Next thing is this...I need #'s....

See my previous post about the #'s. 

What is owed?

What is PITI?

IF she's buying another house can she carry this one based on DTI?

@John Jackson   Thank you for the information. I did speak with her about a Lease Option but she decided not to go through with it. I will mention it to her again in the Holidays when I see her in person again to see if maybe anything has changed. I didnt want to continue insisting and making this a negative feeling to her. So I rather just wait and maybe next time. 

I will make sure to keep his info saved. Thank you.

I wouldn't buy from a relative.  I would help them sell something or buy something (have done this soooo many times), but I would never be their buyer.  Relatives and money should never mix.