Seeking Guidance on First Real Estate Investment Through Seller Financing

[Raul Mena]

I'm looking to purchase my first real estate investment, and I believe this is a good opportunity due to the low pending mortgage balance of $64,000 on my parents' home. Unfortunately, my parents have a high debt-to-income ratio, which is preventing them from securing a loan to buy the house. I, however, have the income and credit to qualify for financing, and i already have a primary residence. My parents are proposing that I purchase the house in cash and enter into an agreement with them in which they would repay me over the course of 13 years, effectively allowing them to regain ownership once the loan is paid off. I believe this may fall under the concept of seller financing, though I'm not entirely sure. I've never done anything like this before and am seeking information about the process, including how to work with a title company to establish myself as the legal owner, how to access the home's equity, and how this might impact my taxes since I don't own an LLC. I'm also trying to understand the potential risks or outliers I should be aware of. I'm new to real estate investing and recognize that some of my ideas might be misaligned or contradictory due to my lack of experience. I'm looking for guidance and mentorship, as I believe this could be a strong opportunity for a BRRRR strategy if structured correctly.

[Patrick Roberts]

Quote from @Raul Mena:

Quote from @Patrick Roberts:

What youre asking isnt clear to me. It sounds like youre saying that your parents own a home with a current mortgage balance of $64k, and youre asking how to take advantage of this. More clarity and detail is needed to be able to provide any insight. 

Thanks for your reply! To clarify, my grandparents are the primary owners of the home, and years ago, they helped my parents secure and maintain it. While my parents aren’t the official owners, they are listed on the title. Given their financial situation, I’m considering purchasing the home through a seller-financed agreement, where I buy it in cash and they repay me over time. I'm looking for insights into the best way to structure this.

 This makes more sense. So you are buying the house with cash from your grandparents, and then selling it to your parents while financing the sale for them. The mechanics of this are pretty straightforward - buy it in cash, then have an RMLO underwrite and close the loan for you. Some RMLO services will provide loan documents, but I recommend that you retain a qualified attorney to have this done on your behalf. From there, have the loan serviced by a licensed servicer. This will be an owner-occupied loan so you want to make sure you are compliant with the regulations that govern these (the RMLO service will handle this). 

The bigger question is around the nature of the deal. Are you doing this help your parents, or are you looking at this as an actual investment. Personally, if I was in your shoes, this wouldnt really be an investment for me - I'd be doing it for the sake of my parents. Give some thought to this question. If they stop paying you, are you going to foreclose?