Buying house from parents at half price, investing other half

4 Replies

Hey BP community, my wife and I will be purchasing our newly remodeled home from her parents at less than half the appraised value. My plan is to still get a loan on the house at appraised value( 80%LTV), pay off her parents and use the rest to invest.

Any pointers on loan products that would LEGALLY allow this?

Thanks!

The lender use gift of equity for this kind of transaction. I don't think you can cash out but may be later on you can get HELOC on the house if its primary residence.

if you are buying from her parents, with a loan.... Just get a loan, and place them first trust deed with the county... easy peasy.  Have a lawyer do the sale.  cheap.


Then get a heloc on the house to invest.  OR refi later and do a cash out refi to 80% as was mentioned.  I doubt you will be able to do a purchase and keep the 30% in that first step...  Heloc is best though... you arent sitting on a bag of cash and paying interest on it for months on end looking for investment properties.

Thanks Carson! In order to get a HELOC I would need to have some equity in the house. And since they are only charging us 40,000, we can only get a loan for that much. And we would in turn have no equity in the home to borrow against.

Are you implying some type of gifted equity situation?

OK, so they are going to sell you the house for half of  its appraised value...?

Call value $100k?

sales price $50k  You have $50k in equity.  You could get a heloc for probably like $35....

Your original plan was to get a loan at 80% LTV, so 80k, and then use the rest. $30k My point is that your monthly payment is bigger, more interest, more everything for you to pay during your hunt for that rental to BRRR or whatever..

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.