All Forum Posts by: Fausto P.

Taking on your father’s two-family property can be a great start, especially since you know it well and have $80k for renovations. Keep the 3.4% mortgage in his name to retain the low rate, and set up a lease agreement where you handle management, pay the mortgage, and share profits. Use your funds to convert the 2-bedroom units into 3-bedrooms to boost rental income. Establish a clear legal agreement with your father on responsibilities and income, and plan for future ownership transfer. 

Don't buy or transfer ownership before he passes to preserve the step-up basis eventually when you inherit.

*This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Run the numbers on each property.  Talk with a local realtor and tax accountant.  There are 50 more questions and answers you need to consider.

Example the house you’re talking about might not be worth anything to you as an investment.  

Say it’s his home.  Value $900,000; $600,000 debt, $200,000 basis; 7% sales commission, only him- mother is deceased- $250,000 cap gain tax free, $70,000 sales concessions or repairs, capital gain tax on $550,000 less costs,  etc etc.  

2 out of 5 year rule, can he live in other buildings?

Is he in good health?

If not in good health or old, how close to retirement home at $10,000 per month?  If he has no assets at time of going in, will they come back and take assets from you?

What are your father’s financial objectives?

What financial impact is the sibling?

Can you do a lease with sales option? Without NNN so he transfers more wealth to you?

1031 into a property you would invest in?

Life insurance?  Is he insurance?

Etc etc. 

@Fausto P.

Hey Fausto, welcome to the forum! First off, huge props to your dad for building that real estate portfolio over the years 👏🏽 

Given the numbers you shared (3.4% fixed mortgage is chef’s kiss), it sounds like a solid property with a lot of upside, especially since you already know the ins and outs and can add value by converting to 3-bed units. 

As for keeping it under your dad's name—that’s understandable given the great interest rate. You could work out a "family trust" or another legal structure where you manage the property, get the cash flow, but maintain the rate. A formal agreement would also be smart to avoid any confusion later on.

Sounds like you’re in a good spot with the $80k to invest. Just run the numbers, and see what your cash flow will look like after the conversion and other expenses. 

FYI - I'm a broker and investor in NYC, shoot me a DM if you want to chat further. 

There are ways for him to sell the property to you even with a mortgage, but there's a lot of complexity involved and I don't recommend it. I think you should focus on saving up and buying your own investments. Maybe you can consider buying his further down the road.

Are you the only potential heir of his estate? If not, you want to be careful around this issue even though he will be around for a long time. You have the potential of something really great here, you just want to proceed slowly and not dunk your money until you can legally confirm it will be your return on investment.

Find out if his mortgage is assumable. If it is, that would be the route to go.