Buying my Mom's house in Texas

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Buying my Mom's house in Texas

Josh Barnett
New to Real Estate · Williamsburg, VA · Member since 2017 · 23 posts · 2 votes

I have been talking to my mom about buying her house in Round Rock Texas that she currently lives in.  I cannot think of any downsides to doing this.  She would sell it to me for what she owes.  Hoping the bank can transfer current loan and mortgage directly to me without any additional stipulations.

She would then pay me rent equal to the mortgage and we would work out a payment for insurance and taxes.

I would then have all the benefits of a rental house. Write off the interest, repairs, "visits" to my property.  I think she bought it for around $180k 7 years ago.  Its worth about 280 now.

This would also set us up incase something happens to her.  It would be less stress at that time and the house can quickly go on the rental market.

What do you think about this plan? If she is willing to do this, should I go for it? Do I need a real estate agent, or would something like this be handled through the bank and insurance company?  Any keywords I should read up on?

I am 35, own 1 house in Colorado Springs, CO, and am Active military. 

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Marc Winter
Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
7y

Directly to your question about transferring the mortgage: unless it's currently a VA or FHA, it is unlikely the bank will simply let you take it over. Think about properly structuring either a Land Trust or LLC, then transfer the title into the entity. You control the entity and can take the tax deductions, etc, without triggering a possible due on sale clause.

Second, Mom will indeed become a tenant, so draw up a proper lease between the entity and Mom.  I would definitely have an attorney or title company do the paperwork and a full title report and insurance before transfer of title.

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  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    7y

    @Josh Barnett what’s the price? You’ll either need an agent or attorney to help you with the purchase. I would only buy it if it cash flows but that does seem like a great way to help her and get a rental house in a good area!

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  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    Directly to your question about transferring the mortgage: unless it's currently a VA or FHA, it is unlikely the bank will simply let you take it over. Think about properly structuring either a Land Trust or LLC, then transfer the title into the entity. You control the entity and can take the tax deductions, etc, without triggering a possible due on sale clause.

    Second, Mom will indeed become a tenant, so draw up a proper lease between the entity and Mom.  I would definitely have an attorney or title company do the paperwork and a full title report and insurance before transfer of title.

    2Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    There is no advantage here for your mother.....only possibly for you, maybe.  Upon her death you inherit the property at the Then current market value...no taxes on the gain if you sell shortly thereafter.

    You will Not assume the loan unless it is an fha or VA loan, And you qualify for the loan.

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  • Laura ShinklePro Member
    Realtor · Charlotte, NC · Member since 2017 · 357 posts · 292 votes
    7y

    @Josh Barnett Like it's been mentioned, most banks won't let you assume a mortgage anymore. Most loans have that written in a clause somewhere that it is not assumable.

    If you're doing it solely for simplicity if something happens to your mother, you can speak with an attorney about structuring a trust or whatever would work best for your situation. 

    If you're doing it for a rental property, it doesn't sound like its a pro for you until if/when something happens to your mom. At that point, if your mother has structured her will and assets well, it should transfer to you without much hassle. If you do this, you're tying up your money in a property that isn't cash flowing when you could be putting that money to use in a cash flowing property if buy and hold is your goal.

    Just my two cents! Clarify what your goal is and speak with an attorney before you do anything.

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  • Jeremy VanDelinder
    Real Estate Coach · Round Rock, TX · Member since 2015 · 431 posts · 235 votes
    7y

    Most modern mortgages are not “assumable” in the strictest sense, however many of us purchase properties “subject to the existing mortgage.” This can be a controversial topic here in the forums, but many investors are very successful using this strategy. Something to consider. I’m here in Round Rock if I can be any help.

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  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    7y

    I would also suggest speaking to an income tax professional as the IRS might not consider this an arms length transaction and subject to gift tax

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  • Josh Barnett
    OP
    New to Real Estate · Williamsburg, VA · Member since 2017 · 23 posts · 2 votes
    7y

    Thank you all for the input! Very helpful in giving me details to read up on and think about.

    Yes I could just wait and inherit the house. I should talk to a tax expert to calculate my taxes if I owned the house to see if it would even benefit me.  Currently I am still taking the standard deduction.

    I will then look at the various transfer methods mentioned.

    I think she owes around $140k.  And yes, it wont cash flow with my mom in there, but ill have other benefits. Mortgage is less than 900, it would possibly rent for 1800.

    Yes, there really is no advantage to this for my mom. But no advantage for her owning a house either.  Makes no difference to her.

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