All Forum Posts by: Raul Mena

I'm exploring my first real estate investment and have identified a potential opportunity with my parents' home, which has a remaining mortgage balance of approximately $64,000. Due to their high debt-to-income ratio, my parents are unable to qualify for a new loan to purchase or refinance the property. Since I have the income and credit to secure financing, and already own a primary residence, they’ve proposed that I purchase the home in cash. The idea is to establish a repayment agreement in which they pay me back over 13 years, with the goal of eventually reclaiming ownership once the full amount is repaid.

Legally, the home is owned by my grandparents, though my parents have maintained it for years and are listed on the title. One of my father’s concerns is the risk of losing the property in the event something happens to either of them, and this arrangement is meant to provide stability and long-term security.

As someone new to real estate investing, I want to evaluate all possible options before committing to any path. One alternative I’ve considered is having the home transferred to me as a gift. However, I understand that receiving the property as a gift may carry tax implications, particularly regarding the cost basis, which could result in a higher capital gains tax burden if I sell the property in the future.

Given my limited experience, I’m looking to fully understand the legal, financial, and tax implications of each approach so I can move forward with the best possible strategy.

I'm looking to start my real estate investment journey. I'm currently house hacking my primary residence, but I'm now exploring the idea of purchasing a second property using the BRRRR method. My goal is to minimize upfront cash outlay by leveraging financing through a lender or potentially partnering with an investor.

I would appreciate any recommendations on how to find solid investment deals and tips on how to approach banks or lenders specifically for this type of strategy. Any insights from those with experience in BRRRR would be incredibly helpful.

I currently have a mortgage that was financed through an FHA loan. I've seen recommendations suggesting it may be beneficial to refinance to a conventional loan after a year. I've lived in my property for three years now and am considering renting out one of the rooms.

My main question is whether it makes more sense to convert to a conventional loan or stay with my FHA loan. I still plan to rent out a room regardless, but I want to explore whether refinancing could help me manage the property more effectively and maximize my return on investment (ROI).

Quote from @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? 

Great points, I’m definitely leaning toward structuring this as a formal transaction to protect both sides. But I’m also doing it to help my parents, not just for financial gain. My goal is to put everything in writing, with proper legal backing, so there are no misunderstandings or awkward situations down the line. I want to be thoughtful and realistic about the risks while still supporting them.

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.

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.

Quote from @Jonathan Greene:

You are reading books, but not interacting with real estate investors at meetups which is why both things you said don't make any sense. BRRRR is not a great strategy in most markets now because inventory to buy is low so you have to pay more which shrinks your mini-renovation to rent ratio due to rates as well.

LLCs are of no use to you now at all unless you are going to run a business through it before investing in real estate for two years. This is classica analysis paralysis fodder. You need to meet more real investors to match the overviews you are getting from books.

 Thank you for the response and the feedback.

I want to start investing in real estate, and I am going over all these books to see the type of strategy that I am going to follow. Right now, the one that has been catching my attention the most is the BRRRR method. Today, I own a single-family home where I am currently renting out one room. I am starting my real estate investing journey and have been hitting a wall with the type of entity that I should establish to start my business, such as an LLC.