Author Topic: Property deeded to me w/line of credit debt. How to finance it?  (Read 905 times)

terarym

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Property deeded to me w/line of credit debt. How to finance it?
« on: November 07, 2019, 06:22:49 PM »
My mother is deeding me her rental house.  House is worth about $65k conservatively and she has borrowed 18k on a personal line of credit that I am taking over, since I donít want her to have the ability to run up more credit on it.  She has 20-year tenants and collects $650/mo.  I am having her keep those payments.  There will be taxes ($1100/yr) and insurance (donít know yet).  My question is taking over that line of credit-credit card w/0% for 18-21 months?  Other kind of loan? 

SwordGuy

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Re: Property deeded to me w/line of credit debt. How to finance it?
« Reply #1 on: November 07, 2019, 09:20:06 PM »
To be sure I understand,

You are absorbing $18k worth of debt, plus $1100/yr in taxes and I'm guessing $1100/yr in insurance and in return, you own a house.  But your mom keeps 100% of the rent.   The house has no mortgage or liens on it.  Did I get that right?

Who pays for the repairs?  Not just the little things that chip away at you $100 to $200 at a time, but the big things like the roof, the HVAC, carpet, painting, a trashed place from a bad tenant?  Property management fees? Umbrella insurance to protect your assets from a litigious tenant or tenant visitor?   Eviction court costs?  Return of the tenant's deposits and excess rent paid?   

Spoiler: show
(Hint: if your mom needs this kind of help with her finances the answer is "you".)


It's great to help your mom, just make sure you know what you're signing up for.   And recognize that if you don't have the right legal paperwork in place, a judge ruling on behalf of a tenant can take it out of your pocket as the property owner...

The other part I'm not sure I understand.   This is a personal loan or a HELOC?  One is secured by a property (presumably this one) and the other is not.    Depending on how the line of credit is set up, she could take money out of it as fast as you put it in.   So, when you say you're "taking it over", what do you actually mean?








Car Jack

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Re: Property deeded to me w/line of credit debt. How to finance it?
« Reply #2 on: November 08, 2019, 07:25:53 AM »
My solution would be a simple answer:  "No thank you".


Villanelle

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Re: Property deeded to me w/line of credit debt. How to finance it?
« Reply #3 on: November 08, 2019, 07:41:37 AM »
Well, this is almost certainly terrible idea, but for the moment I'll assume that's not up for discussion.

What do you mean you are "taking over" the debt?  What kind of debt is it--"Personal Line of Credit" doesn't fully explain it?  Does your last sentence mean you are considering getting a 0% credit card onto which you want to  shift the debt?  If that's what you are saying, how would you get her debt onto your credit card? 


terarym

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Re: Property deeded to me w/line of credit debt. How to finance it?
« Reply #4 on: November 10, 2019, 03:02:25 PM »
Thanks everyone for the considered responses.  Re-thinking taking this on.

Frankies Girl

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Re: Property deeded to me w/line of credit debt. How to finance it?
« Reply #5 on: November 10, 2019, 03:37:43 PM »
If she's wanting you to get the property "free and clear" as a future inheritance, then doing this is going to be a bad idea. It robs you of the stepped up cost of inheritance.
Basically, if she bought the property for $40K and you get it deeded to you now, if you sell it, you are now on the hook for the property's appreciation since HER purchase price. So say you sell it for $75K... you'll have to report $35k on the ol' taxes for property appreciation (not quite the same as earned income as it's taxed slightly differently, but super likely to push you into a higher tax bracket and cost you lots of your own $$). If she instead left the property to you after she died, the value of the property "resets" to her day of death - whatever the last property tax assessment was generally (can get it professionally valued/assessed but likely not worth it unless you are able to sell it for significantly higher for some reason and want to make sure to minimize the difference usually only done on really high dollar property).

If your mom is just wanting to transfer the property to free up money for herself, or finagle some under the table stuff like reducing assets for qualifying for programs like medicare/caid, then you're just taking on a huge mess that is entangling yourself into potential costly repairs, liability and other trauma-inducing nightmares without a real upside.

If your mom needs money or is sick of managing the property: best possible outcome would be to sell it. Pay off any loans and remaining proceeds banked in stable money market account.

Don't step into this mess if you can help it. It does not sound like it will work out in anyone's favor let alone yours.

terarym

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Re: Property deeded to me w/line of credit debt. How to finance it?
« Reply #6 on: November 11, 2019, 08:04:23 AM »
I am grateful to have the Forum for some perspective.  I am choosing to help her with some payments on that line of credit, and saying no to having her deed it to me.  I was motivated by wanting to help and getting an asset for that help. I am cautioned by the liability issues and the fact that the taxes have increased 11% in 2019 on a very low valuation.  I havenít seen the house in person for 10+ yrs and the Zillow photo shows it to be in poor shape. My mother married in 1998 and moved to her husbandís home and the same tenants have been in the house for 21 years.  There is no lease or paperwork except a record of rent payments (which have been made promptly-no issues there).  I agree to wait for inheritance and deal with it then.