Using Family Home Equity

13 Replies

Hi all, 

I have another question which I know is mentioned in a recent Podcast about investing with little or no downpayment with Brandon Turner.  Question is how does one go about using a family members home equity (dad) to use as a downpayment to purchase a home?

Sorry if I'm not using the right terminology or if I'm completely wrong on how the process works.  My dad has been pretty supportive in different endeavors I have taken a part in and with a little negotiating/pleading I believe I can sway him to come on board.

I'm trying to come up with a creative way to find the money for a downpayment for a property.  Also are there any dangers that come with my dad using his home equity to help finance my investing dreams?  Not even sure if this method is even possible but I would love to hear you guy's input.

You dad would have to do a heloc, refinance, etc to pull the money out. If he gifts you the money their will be tax on it. Have you thought about doing a personal property with little no no money down. Than you could rent out the rooms in your houses. This would allow you to live free while having someone else pay the living expenses

Originally posted by @Elizabeth Colegrove:

You dad would have to do a heloc, refinance, etc to pull the money out. If he gifts you the money their will be tax on it. Have you thought about doing a personal property with little no no money down. Than you could rent out the rooms in your houses. This would allow you to live free while having someone else pay the living expenses

 Oh ok, so doing the home equity would consist of a lot of paperwork? Would you say its not worth the effort?  I was also thinking about a personal property but wouldn't be able to rent it out for a year or so. I couldn't rent out the rooms because for likely than not I will have a kid in most of the rooms.

Real Estate is full of paperwork. The key is to figure or what you want and where you want to go!

Originally posted by @Elizabeth Colegrove:

Real Estate is full of paperwork. The key is to figure or what you want and where you want to go!

 Ok thats understandable, right now I want to buy and hold for the cash flow.

we are buy and hold. We do short sales because they are under market value typically. On the other hand they have tons of paperwork. We are also buy and hold and we fund through living frugally and using cash flow from other homes. So their lots of options!

Originally posted by @Elizabeth Colegrove:

we are buy and hold. We do short sales because they are under market value typically. On the other hand they have tons of paperwork. We are also buy and hold and we fund through living frugally and using cash flow from other homes. So their lots of options!

Oh ok, question about your first property that you bought. Did you all renovate your main residence while you all were living in it before you started to rent it out? Whenever I do finally pull the trigger on a property (thinking about using my VA Loan) I was wanting to spruce up a few things here and there just to make the property more appealing to potential renters in the future.

The danger is if the deal goes bad and you can't pay back the loan  (equity) he will lose his house.   I would never ask my parents for their home equity or retirement to do something for me.   If he has disposable income and wishes to invest with you, that's different.  

Originally posted by @Brian Mathews :

The danger is if the deal goes bad and you can't pay back the loan  (equity) he will lose his house.   I would never ask my parents for their home equity or retirement to do something for me.   If he has disposable income and wishes to invest with you, that's different.  

He does have disposable income but I was trying to learn more about the home equity side of it. I'm just seeing all options that are available for me. Right now my thinking is just using my VA loan.

We used my husbands va and it worked out really well! We lived in it and fixed up. When he was transferred we rented it out! The key is To not over fix it up! Remember there is a ceiling on what houses will rent for! We over fixed up our first house, no now we have found out less is more!

Originally posted by @Elizabeth Colegrove:

We used my husbands va and it worked out really well! We lived in it and fixed up. When he was transferred we rented it out! The key is To not over fix it up! Remember there is a ceiling on what houses will rent for! We over fixed up our first house, no now we have found out less is more!

Oh that's great to hear that's what I was figuring I should do as well. With you all using your VA loan did you also get a separate loan to do the renovations or was it out of pocket?

Renevations were out of pocket. We did them ourself over the year funding it from our paychecks. We had 10% or so saved up. We put down 0% and ended up not needing it and therefore it funded our first pure rental!

Originally posted by @Elizabeth Colegrove:

Renevations were out of pocket. We did them ourself over the year funding it from our paychecks. We had 10% or so saved up. We put down 0% and ended up not needing it and therefore it funded our first pure rental!

 How much would you say your renovations were? I have been looking at homes in my area (which are overpriced in my opinion) and most have unfinished basements. That would definitely be an area I would want to tackle first. 

my husband and I didn't 90% if all the work himself. 

* gutter 1 bathroom redid most of another

* painted entire house

*new flooring upstairs

Installed automatic garage doors

New closet systems in entire house

Removed overgrown boxes outside

Installed cabinets

Painted kitchen cabinets

Installed light fixtures and fans in the entire house

That costed is $12kish had I did it again I wouldn't have gone for such high end and did it for about 8k

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