All Forum Posts by: Adriel Irons

Thanks @Dave Foster, @Account Closed for your insights. It is sounding more and more like transferring the property to my name isn't the best financial move.  I'll look into reducing the property management costs as it seems that's the best option I have, outside of having her walk away from the house and incur a large negative impact to her credit, or selling at a loss and helping to cover the shortfall. 

Thanks @Natalie Schanne, @Paul Caputo and @Clayton Mobley!  I appreciate the additional insight.  I had considered the 1031 exchange, though was more so thinking of doing it myself after transferring control of the property, and doing it in a few years after the house had appreciated more/had more equity.

The issue with a sale right now is that the house is worth ~185k (according to Zillow, and seeming reasonably accurate based on recently sold comps), while about ~178k is owed on it.  Assuming at least 6% in broker commissions (and not including closing costs), and we are looking at a $4k shortfall, as opposed to having any profits to reinvest.

Reducing expenses and better managing the property will need to happen, regardless of the route I take, so that makes a lot of sense.  I think the issue is that my Mom no longer wants any kind of investment property.  It was tough to get her to rent the house in the first place (as she thought renters would lower the property value, and she preferred covering the full cost of the mortgage, as well as her rent elsewhere).  Now that life and financial situations have changed, she sees the house as an albatross and I want to help her find a way out of it.

With that said, it seems to me that any scenario involving me inheriting the house as part of an estate would mean a high likelihood that I would be covering part (or all) of any mortgage shortfall, such as low rent or vacancies, as well as other expenses at some point in the future, without the house being in my name.  I wouldn't be getting the tax benefits of house ownership, but I would have some level of liability if she was no longer able to take care of it.  She isn't yet 60, and my grandmother lived to almost 90, so hopefully, the estate option isn't in my near future.  Is there anything else I'm missing?  Is there a way I could get the benefits of having the house, or being able to leverage it, without having to bring a great deal of money to the table in closing costs or additional downpayment that gets her out of home ownership and me into the drivers seat? 

Hi BP Folks,

I've been a podcast listener for some time, and have been working up the nerve to jump into investing. I live in NYC, which means that local deals (or even a primary residence) are difficult to come by.  I grew up watching my Dad rehab, flip and rent homes, so I've seen (and done) some of the grunt work, but I have yet to get my own skin in the game.

On the flip side, my Mom has had a house that I've worked with a property manager to keep rented for the last 10 years or so.  It's in central Florida and started as our primary residence, before she moved and I convinced her to rent it out rather than letting it sit vacant. She held it through the downturn, when it was severely underwater due to refinancing at the height of the market to do renovations.  Last year, I helped her refinance it under Harp 2.0, and it's right at break even.

So now, my situation.  My Mom has never looked at the house as an investment, and doesn't like having an investment property at all.  She wants to get rid of the house more than anything. She's been anxious to sell the house, but with less than 4% equity in it, I'm pretty sure that even if she got market price for it, she would walk away from the closing table owing transaction costs.  The other issue is capital gains.  the house is worth close to double what it was at purchase, and even with renovation costs built in, I'm thinking the depreciation she's been taking will mean that she winds up owing something the next time 4/15 rolls around.  All of that led me to think that maybe me taking over the house is the best option for us both.

I'm not thinking of it as a good investment.  Though I don't think I would have a downpayment, I'm anticipating transfer costs.  The house currently rents for 1200, though market rate is about 1400.  Mortgage, taxes and insurance came out to 1230 after the refinance. The property manager takes 10%, as well as an annual releasing fee and property inspection fee, plus maintenance.  With the current mortgage, there is negative cashflow, and because of the low equity, I don't think I woul be able to refinance without putting in a considerable down payment. 

With that said, my Mom isn't getting younger, and has had financial trouble in the past.  She's not completely out of the woods either.  While I hope she remains healthy and independent for a long time, life doesn't always work out the way you want it to.  I would rather make arrangements now while there is time to do things properly.  The house is appreciating pretty well and is in a desirable neighborhood.

If you've made it this far, thanks for reading! My question is, am I missing something?  Right now, I'm going to try having her mortgage company transfer the mortgage into my name, while having her do a quit claim deed to put the property in my name as well.  With the property under my control, I would look for ways of improving the cash flow (renegotiated terms with the property manager, or new property manager, increased rents, etc.) but I don't anticipate being able to do better than break even in the short to mid term.  Are there better approaches that I haven't thought of, and has anyone out there done something like this successfully?  Thanks for your advice!

Thanks for posting this.  I am considering doing the same thing for my Mom.  Is there no way to remove the parents liability?

Looking forward to meeting everyone.  I'm new to the NYC real estate scene, and looking to soak up info, and share whatever I can.