Next Step to take for New Investor

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Next Step to take for New Investor

Gerardo O.
CA · Member since 2019 · 3 posts · 0 votes

Curious to gather everyone's insights on what the best approach to paying off the remaining balance of an existing mortgage (CA) is, while setting the proper foundation to build future wealth through a portfolio of properties.

My parents still live in the house I grew up in (Central Valley) + don't plan on leaving for several decades. With my dad's job taking a hit due to the current pandemic, he's asked me to find the best way forward. Is it best for me to:

A) Assume the mortgage and pay it off outright. Then save again for another few years, until I have enough for a down payment on a property where I am (Bay Area), that I can house hack or, 
B) Assume the mortgage and pay it off over time, while deploying some savings towards a down payment on another property in my hometown (I go back every 2 weeks) - handling 2 mortgages at once. 

I could just pay the mortgage and leave it under his name, but I figured if I can build credit then why not. If there is another option I should be taking into consideration, then please let me know because I am here to learn. Any advice on things I should look out for (taxes, unexpected costs, due on sale clauses, etc.) would also be greatly appreciated.

Thank you for any wisdom you can share in advance!

Best regards,

Gerardo

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    6y

    @Gerardo O. can you provide some additional information on this situation?  Are you saying that your parents NEED your help to pay the mortgage (which is perfectly legitimate), or are you asking something different?  I ask because helping to pay their mortgage is going to make it more difficult for you to invest, no matter how you do it - but if it's important to you to help, that's totally fine.  As for exploring whether is is even possible for you to assume the mortgage - you'd want to talk to the bank.  Maybe there is a forbearance program your parents are eligible for, that you can help them with instead.

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  • Kathy Henley
    Rental Property Investor · St. Louis, MO · Member since 2014 · 741 posts · 424 votes
    6y

    Dad needs help @Gerardo O. This is different than an investment. Your parents don't plan to leave but must adjust to a new plan so that they can stay. Do you get to help him with his family budget? This doesn't work in my expended family.

    Take over his payments, if you want to help him out of this temporary hardship. Or you could lend him a chuck of money, but record a deed on the property so that your money will come back to you if the property sells.  One must take precautionary measures - hope for the best but make plans for the worse. 

    The situ is difficult, no doubt. If you were to pay off the note outright, you would become his landlord. He should pay rent and utilities. Would this be a good investment? You might have a solid job, currently. Keep saving and be selective as to how and where you put your money to work for you.

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  • Jeff Zimmerman
    Real Estate Agent · Fresno, CA · Member since 2014 · 368 posts · 174 votes
    6y

    @Gerardo O. sorry to hear about your parents situation.  I think the easiest and cleanest way to help your parents out would be to purchase the home from them while allowing them to remain as tenants in the home.  You can decide if they pay rent or not and if so, what the rental amount will be.  In fact you could just allow them to continue to pay the bills for the home like they currently are, except the mortgage as that will be in your name after purchase.  

    After purchase, they will also have a nice nest egg built up (assuming they have some equity) to carry them for a bit until they get back on their feet with employment.   It would be tough to assume his mortgage as most residential loans aren't assumable.

    Another option is for them "wrap" the mortgage.  If you liked the terms of their mortgage vs a new loan you could get, you could purchase the home with seller financing and pay your parents an interest rate.  then they would continue to pay their mortgage accordingly as they wouldn't pay it off upon sale.  There are a few risks involved with it but it is a strategy that has been used a lot. 

    Does that all make sense?  where are you at with the process now?  Happy to chat more over the phone if i can help.  Feel free to message me.  If you did choose to transfer ownership of the home it would be pretty simple and inexpensive as family members.

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