Thanks to all the great knowledge found here and elsewhere we are close to purchase our first investment property (a duplex). Initial we were going to use a mortgage to purchase the property but my mom offered to act as the bank in this transaction. She trust me and I trust her however we want to do this correctly. What would be the best way to go about this? The goal is to make this agreement as solid as possible in case something happens to either one of us the agreement will live on.
Also we discussed in 5-10 years me buying her out with a mortgage so I could extract the equity for another purchase. Would this be difficult? would it essentially just be like acquiring another mortgage? how long would this take? Is there another way I can keep the money I owe her easily accessible in case I need to do early repayment like a Heloc?
You're going to need to talk with real estate attorney and draw up a note and mortgage (which will have to be recorded at the county courthouse). You'll have to meet an interest rate requirement, and they should be able to tell you what that is. Once you draw up those docs, you can even put the note with servicing for a nominal monthly fee and they'll handle all of the accounting, tracking payments, etc.
And you're correct about buying out. You'd refinance after a few years of owning it (as long as you have a pay history - which will look more official with a servicer) and take her out with that refi money.