Greensburg, PA · Member since 2014 · 12 posts · 4 votes
Greetings, first post here!
Let me be clear that I have no properties currently and am still in the learning stage of real estate investing.
Having said that, I have a question:
My mother has offered to our (wife and I) first property. She isn't even worried about getting money back (she's looking at it as a forward on inheritance). So if she buys it, how does it become ours? I understand she could purchase it without a loan, but then does she transfer it to me? Certainly there are some tax implications in doing that that might just outweigh getting the loan myself. That said, could she just sell it to me then at an interest free rate? (I know that if she sells it for a dollar I pay big taxes for the gains) Any help is appreciated but please provide details.
It sounds as if one way or another you'll eventually end up with the property in your name. However, if you want to speed the process up, here is what I am currently doing. Now let me state first, this is an option I have in AZ so I am not sure if it would apply to PA, although I see no reason why it wouldn't.
Similar situation, my parents bought a "2nd home" here in phoenix that I currently reside in. They have no plans of occupying the condo, yet the loan is in their name. In order for me to ascertain the property I must first ADD my name to the DEED. You can either do this at closing (which is the quickest/easiest way, because you're already there signing docs) or you can do it further down the line. Its a rather nominal fee to add yourself to title.
If she happens to get a loan for it, in as little as 6 months you may do a refinance to drop your mom off the loan, if you qualify. Otherwise, you can continue living their until you're capable of being financed to do so. If there is no loan, she can simply sell the property for "love and consideration" in the amount of $10 (or some other small amount), which you'll see often when real estate is being gifted.
I've worked out an agreement that my parents will stay on the loan for 2 years before I refinance the loan (solely on my credit) to remove my parents gaining full financial and ownership responsibilities.
Just my opinion, have her buy in her name and enjoy it as your own, when estate settled it will pass at stepped up rate to current value, so little to no tax implications. Or have heard she can transfer now as part of future estate but any gains will be taxed from that day forward, not being a lawyer and knowing your states laws, contact one, usually they will give you a free consultation to discuss and give you prices based on different situations and taxes based on each.
It sounds as if one way or another you'll eventually end up with the property in your name. However, if you want to speed the process up, here is what I am currently doing. Now let me state first, this is an option I have in AZ so I am not sure if it would apply to PA, although I see no reason why it wouldn't.
Similar situation, my parents bought a "2nd home" here in phoenix that I currently reside in. They have no plans of occupying the condo, yet the loan is in their name. In order for me to ascertain the property I must first ADD my name to the DEED. You can either do this at closing (which is the quickest/easiest way, because you're already there signing docs) or you can do it further down the line. Its a rather nominal fee to add yourself to title.
If she happens to get a loan for it, in as little as 6 months you may do a refinance to drop your mom off the loan, if you qualify. Otherwise, you can continue living their until you're capable of being financed to do so. If there is no loan, she can simply sell the property for "love and consideration" in the amount of $10 (or some other small amount), which you'll see often when real estate is being gifted.
I've worked out an agreement that my parents will stay on the loan for 2 years before I refinance the loan (solely on my credit) to remove my parents gaining full financial and ownership responsibilities.
Derek is right! Get your names on the deed right at the purchase and all is well from that day forth! Proceed directly to GO collect $200!
Also when this is all said and done could you have your mom get in touch with my mom and explain to her how a little financial planning could have helped her kids RE careers out, LOL
Best of luck and congratulations on your start in Real Estate!
Check and make sure what the annual gift maximum is. Last I chafed it was 13k so that would mean anything over that would be a gift and have tax implications.
That said you can split it multiple ways, you mom can give you a 13k interest in the house, and, if he is on the deed so can your father. After that they can each give a 13k interest to your wife, as long as she is added to the deed.
If the value exceeds the 52k mentioned above, then it may take more then one year to transfer a full interest in the property. Note, I am not a tax lawyer so check with your accountant or legal team.