Author Topic: Investment Property for Family Member: Co-sign for Owner/Occupied Rates  (Read 964 times)

LimaDon

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I was talking to my mortgage banker (good guy) about getting my feet wet with our first investment property for my grandmother who is looking for a new place and would gladly welcome her grandson as a landlord. Our banker suggested that instead of doing an investment property loan (higher down payment and rate) that I  should consider including her on the loan so we can take advantage of the owner-occupied rates.

Would love to hear thoughts on this. I like the idea of being able to take advantage of the smaller rate and smaller down payment requirements to free up capital for additional rentals. My only concern is around what would happen if grams needed to transition to assisted living in a few years or when she passes (hopefully not for awhile - she's my favorite). Would I then have to worry about her (taxes and ownership)? Ultimately my goal would be to continue to own this property and rent it out even after its served its family utility.

Is this advisable? Special structuring or deed considerations?

Thanks,
Don
« Last Edit: August 02, 2016, 10:35:11 AM by LimaDon »

Ensign1999

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Re: Investment Property for Family Member: Co-sign for Owner/Occupied Rates
« Reply #1 on: August 02, 2016, 06:56:44 AM »
Hopefully more experienced property owners and land lords will chime in, but here are my two cents....

- I wouldn't have a problem with doing an owner occupied loan with my grandma if she was up for it.  I would still treat it like a rental with respect to taking care of the mortgage payment, taxes, insurance, maintenance, etc... Grandma would just make the agreed upon "rent" payment and I would take care of the rest.
- I would make sure that she has a will or other form of legal documentation stating that when she passes on, full ownership passes to you and that the property is not to be considered as part of her estate (assuming there is much to be worried about).  It would be a shame for any of her kids or your cousins to assume the house was hers and that you are getting a good deal out of it.
- You might be able to avoid the whole ownership problem if you can get the house titled only in your name.  The loan would be in both, but legally you would have sole ownership.  I'm not 100% sure this is possible.  Seems like when I purchased my first car, my Dad cosigned the loan, but it was only titled in my name.  I know houses are vastly different than cars, but it might make things easier.  We've done sort of the reverse of this as I've applied for loans by myself as my wife is a stay at home mom and I have a higher credit score, but when we went to close we've had the properties titled in both our names so if something were to happen to one of us it would make the legal stuff afterwards a bit easier.

Cassie

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Re: Investment Property for Family Member: Co-sign for Owner/Occupied Rates
« Reply #2 on: August 05, 2016, 01:10:23 PM »
I would talk to a lawyer because if she goes into a home and gets on Medicaid for care they will force the sale of the house to get back the $ they paid from what I have read.  I would want a lawyer that is very familiar with this area of the law.  You don't want to take any chances on losing your investment.

Choices

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Re: Investment Property for Family Member: Co-sign for Owner/Occupied Rates
« Reply #3 on: August 05, 2016, 03:14:17 PM »
I would talk to a lawyer because if she goes into a home and gets on Medicaid for care they will force the sale of the house to get back the $ they paid from what I have read.  I would want a lawyer that is very familiar with this area of the law.  You don't want to take any chances on losing your investment.

Not just Medicaid, but any debts she might accrue. She might be responsible and have her wits about her now, but seniors are easy prey for scams and if she develops dementia she could rack up some debt before anyone finds out. Your house could have to be sold to settle her estate.

SwordGuy

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Re: Investment Property for Family Member: Co-sign for Owner/Occupied Rates
« Reply #4 on: August 05, 2016, 06:55:19 PM »
I remember seeing a link to an article by someone who rented to his mom. 

He explained all the reasons it was a horrible idea.  The most telling were the emotional ones of having one's mom view one as a landlord.   

Hopefully someone else can find the article...