Owner/Seller Financing family opportunity

Owner/Seller Financing family opportunity

Flower Mound, TX · Member since 2017 · 4 posts · 0 votes

Hello. I am a first-time home buyer and might have the opportunity to purchase a small, 2 bed, 2 bath 1100 sq ft home from my parents using seller financing. The home is paid in full, and they rent it out for $1400 a month. They have consistently had nothing but terrible tenants, and the home was built in 1985, so it still needs some updating. It's valued at $145,000. I'm looking for advice going forward. Any thoughts or concerns? I would obviously consult a real estate attorney to help write up the paperwork. Thank you guys. I understand these deals aren't very frequent nowadays.

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  • Real Estate Agent · Seattle, WA · Member since 2016 · 49 posts · 11 votes
    9y

    With how prices are nowadays for homes, it's always great when you already have a lead to being able to purchase your own home. Especially with the flexibility of it being within the family and doing seller financing. It really depends on your willingness and ability to take on a responsibility with owning a home as it can be no easy task at times. However the rewards can be well worth it if investing in the right property.

    I can't quite say for sure the best route as I don't know all the details but I would be happy to answer any questions you might have in the future!

  • Flower Mound, TX · Member since 2017 · 4 posts · 0 votes
    9y

    Appreciate your input, thank you. Any input as from an IRS point of view?

  • Flower Mound, TX · Member since 2017 · 4 posts · 0 votes
    9y

    Also, can my parents do a 10/31 tax exchange and try to get another home and try to avoid some depreciation tax?

  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    9y

    @Account Closed, Your parents could sell to you as a related party and do a 1031 purchasing a different replacement property.  this is one of the exceptions within the related party rules.  However, to be completely in the clear you will have to hold their old property for 2 years and they will have to hold their replacement property for 2 years

    There is a bigger problem that could cause issues with their 1031 and that is the owner carry note.  That doesn't keep them from doing the 1031 but in order to fully defer all tax they must purchase at least as much as they sell and they must use all of the proceeds in the purchase - that includes the cash down and the note.  Since it is highly unlikely that they will find a seller who will accept an unseasoned note like that as partial payment on a property they will have to find a way to replace that note with cash.  If they have cash at hand from any other source to swap with the note in their exchange acct before they make the purchase they can make it work. 

    The 1031 Investor5137 Reviews
  • Investor · Menifee, CA · Member since 2015 · 534 posts · 216 votes
    9y
    Seller financing is a great way to pick up properties. Your parents could save some money on taxes if they do seller financing with you cause it's paid off over time. You guys make up the rules that works for both of you. I have fun sitting down, or talking over the phone, with sellers about carrying the note. You can get so creative and just going back and fourth figuring it all out! Interest rate, down payment, balloon payment, even creating your own amortization schedule if you want set principal amounts each month, etc etc etc. Everything will be between you and your family. Go for it!!!!
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