My wife and I have the opportunity to purchase our first investment property, her mom's house. We are newbies in the game and we want to do seller financing to take over the mortgage. We live in the Pittsburgh area, and her house is in an up and coming neighborhood. Her mother is having mobility issues and we feel like this could be a great chance for us to take, while improving her quality of life. With some TLC, this is a diamond in the rough! I have been researching this topic and have consulted another investor friend of mine. However, any further insight on the topic or directions I need to look at, or steps to take, would all be great. Thank you.
@Joshua Smith Congratulations on taking the initiative to get started! Pittsburgh such a great market to get into! It sounds like you are in a great position to seller finance just confirm that the seller “your mother in-law” owns the property outright.
@Joshua Smith Congratulations on taking the initiative to get started! Pittsburgh such a great market to get into! It sounds like you are in a great position to seller finance just confirm that the seller “your mother in-law” owns the property outright.
@Joshua Smith Owner financing is only good when 1. You dont have the credit to get a loan from a conventional lender. 2. The terms and interest rate are better than a traditional bank. 3. The down payment is less than a traditional bank. There are other pros and cons but those the the top three in my opinion.
Reading your post, I guess I'm most curious about the personal side of this financial/investment question (I hope I'm not prying). By improving her quality of life, do you mean that she would still be living in her home still and you would be doing some upgrades, getting it ready to rent? Or you would be moving in with her and be a help around the house? Or maybe she is moving out into some form of assisted living?
I just ask all of that to bring up the hard subjects you may not have discussed with her yet, such as what happens if you can't make a mortgage payment? Or maybe she is still planning to live there and pay you some sort of rent? What happens if she can't pay? Seems like you have a good relationship with her, but adding a financial aspect to a family relationship can definitely put a strain on things even in the best case scenario.
I'm probably reading way too much into this (again, sorry!), but I think my short answer would be to go out and get your own mortgage if you and wife would qualify, especially with interest rates being so low. It will just keep the family relationships healthier and prevent any kind of financial strain from happing in a worst-case scenario.
@Nathaniel Buck Thanks for inquiring. We weren't thinking about moving in with her, but have her relocate to a different arrangement (i.e. all one level or less stairs) which would be better for her in the long run. She still owes on her home, which is why we thought about going in this direction. We take over what's remaining (around $57k or so) and make payments to her.
@Alex Deacon Hi Alex, thanks for responding. We are getting our credit under control as we speak. Seller financing was an option as a way of not having to deal with banks if we didn't need to. Now, if everything goes the way we envision, we may need to go to a bank or my credit union, about covering renovation costs.
@Nathaniel Buck Thanks for inquiring. We weren't thinking about moving in with her, but have her relocate to a different arrangement (i.e. all one level or less stairs) which would be better for her in the long run. She still owes on her home, which is why we thought about going in this direction. We take over what's remaining (around $57k or so) and make payments to her.
How's her credit? Won't she (or you) need to pay up front for her "different arrangement", or would it just be renting? I suggest getting a suitable Attorney to make sure the mortgage is assumable while the ownership is changing, and to calculate a fair (amortized) payment schedule once a purchase price is settled on.
I recommend that once signed and sealed, you take over her mortgage payments yourself, rather than paying that portion to her each month. That way, you could get ahead of her Lender's schedule if that appeals. Good luck...
@Brent Coombs Her living arrangements would most likely be an apartment. Assuming the mortgage payments would make sense. I am going to seek council to make sure nothing is out of place.
My wife and I have the opportunity to purchase our first investment property, her mom's house. We are newbies in the game and we want to do seller financing to take over the mortgage. We live in the Pittsburgh area, and her house is in an up and coming neighborhood. Her mother is having mobility issues and we feel like this could be a great chance for us to take, while improving her quality of life. With some TLC, this is a diamond in the rough! I have been researching this topic and have consulted another investor friend of mine. However, any further insight on the topic or directions I need to look at, or steps to take, would all be great. Thank you.
Hey Joshua,
I'm not an attorney and you should consult one. If you want my attorney's contact info I'll be happy to provide it just message me. He's done a few seller finance agreements for me in the past.
You are looking to assume her mortgage it sounds like. If you want to officially do this you'll need to make sure the mortgage is assumable. You could also so a lease option agreement. Lease option would probably be the easiest in this case I would think if the mortgage is not assumable. A lot of conventional mortgages are not assumable.
These could all become messy options by the way, the simplest option is to outright purchase and just rent to her. That way there aren't any issues in the future personally. Everything is peaches with friends and family until something goes wrong. . . It's easier when there's a clear arrangement up front about who owns what.