What To Do With 300K House in Brooklyn

Question

I know someone whose father is deceased and he wants to buy his sister out of the house.

The sister name is on the deed, etc.  The sister wants to be bought out of her 50% and free of the property.  There is 300K mortgage left on the property valued at 670K.    It is a single family 3 bed 1 bath with basement.

He is new to investing and wants to leverage the property to eventually buy a home down South.  He wants to use the house as an income stream, and start investing.  He's worried his poor credit may prevent him from mortgaging the house.

What is the best strategy to leverage the house to invest in other properties, rent the property (airbnb?) vs him just taking on the property and doing nothing? What would you do if you were him?

Dave Van Horn · Answer

@Mary Ann

I think most of us our leaning towards the "sell now" option because it's the fastest, easiest, and most surefire answer. It doesn't sound like the sister wants to wait while he repairs his credit and rents out the property, so he doesn't really have much choice in my opinion.

He most likely cannot access the equity in the property since he can't qualify for a refi with bad credit...the only way he could tap into it is if he had a private investor lend the money to him.

There's also one other big detail...they have to settle the estate.

Mark Sewell · Answer

I would say he needs to go ahead and sell the place in NY, and get his hands on the proceeds.  It might not go as far as he thinks, but get that in hand.  Then buy something inexpensive down south somewhere -- just really got to buy smart.  The good news is you can get a LOT of house down south for not a lot of cash (compared to NYC).

Maybe go the Bigger Pockets house-hack route and find a decent duplex or triplex that he can rent out, while living in one unit.  Create your income stream there.  Then he can go back and refinance it, once he has renters in place.

Dave Van Horn · Answer

@Mary Ann

Why not just sell it? The mortgage gets paid off, he splits the money with the sister and then he won't have to worry about managing it/maintenance or qualifying for a mortgage.

That's the easiest solution it seems like.

Mary Ann · Answer

If she turns the house over to him, can he buy her out from the equity since he cant refinance with bad credit? Also would he need good credit to have the house turned over to him?

Mary Ann · Answer

So is the consensus just to sell because it's in a high market?

Dave Van Horn · Answer

The bad credit is the big issue here. He could take over the property subject-to her mortgage, but he wouldn't be able to pay her back since he can't refi out seeing as he won't qualify for it with bad credit.

I'm with Mark, take the proceeds now and buy down south.

Mary Ann · Answer

He doesnt want to sell YET because Brooklyn is such a great market and he wants to start investing.  But he's has bad credit, and is renting now. He sees this as an opp to build is financial security.

Mary Ann · Answer

She owns 50% of the property,  I am not sure what she is asking for to sell.  I'm sure asking price.  Could the sister turn over the mortgage to the brother and put him on the deed, refinance, and buy his sister out so he owns 100%?  Or would he need to apply for his own mortgage.  Just thinking.

What To Do With 300K House in Brooklyn

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