Questions About Parent Owned Fix and Flip

1 Reply

Hi guys and gals, long time lurker, first discussion thread.

So I am looking for some advice on our situation.  We selling our current house living in my wife's parents house.  They bought another house and let us live in the old house while we made the last few upgrades to our house.

They are agreeing to sell us the house for $195k. It appraised at 260k as it sits but does need the septic replaced and is in bad need of an update inside. We plan on putting approx. 55k into the rehab (including septic) and expect an ARV of 290K based on comps in the area.

Ive been looking at how I can maximize the return on this.  Here's my thoughts:

We dont buy the house yet, instead we rent it from them and pay the current mortgage. We then use the equity from our last sale to rehab this house.  We have a real estate attorney draft up something to the effect that upon sale of the home any money collected from the sale over 195k goes to us. Does that make sense?  This would appear to save us closing costs on the buy of the new house and capital gains tax when it sells. What am I missing, is there a better way? I appreciate the help.

Chuck 

Chuck,

Not too familiar with this but chiming in to get some ideas going.

Could you clarify how this approach would save on closing..

My understanding is capital gains can only be avoided when its a direct purchase of another property..

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