Good idea to purchase parents' mobile home?

Question

To make a long story short, my mother passed away last year and my step father is living in their mobile home with a relatively high interest rate and no banks willing to refinance. We recently started tossing around the idea of purchasing it myself and him paying me "rent" which would essentially come out to break even cash flow. I know rent will come on time every month and I know eventually it will be easier if this is done now rather than dealing with a mortgage I can't control. He has a plethora of health issue so I'm thinking about this long-term and whether this will be a good buy and hold investment. It sits on .25 acres which is also owned by him.

My initial thought was to do a Sub-2 on the property then eventually refinance into my own name shortly after. That would prevent a 20% down payment needed to complete the deal, is that correct? I want to help him get out of the high interest loan while also starting to build my portfolio of rental properties. Are there better ways to approach this??

My initial thought was to do a Sub-2 on the property then eventually refinance into my own name shortly after.  That would prevent a 20% down payment needed to complete the deal, is that correct?  I want to help him get out of the high interest loan while also starting to build my portfolio of rental properties.  Are there better ways to approach this??

Joe Schultz · Answer

Helping your stepfather...awesome. If you lived there for 6 months or a year (even if in a RV, maybe) you would qualify for the cheapest types of loans. Not sure about all the requirements to meet this type of a loan but thought this might be helpful.

God bless you, Joe

Troy P. · Answer

@Nicole Heasley my stepfather's credit is actually excellent.  The small number of banks I checked with are not willing to refinance because it's a single-wide manufactured home.  Once I purchased it, I would probably never need/want to refinance.  Now that I think of it, although the home and land is in good shape, it is approaching 20 years old and it may start to become difficult to get any type of financing for that property as a whole...

@Rachel H. thank you.. yes I thought about mixing business and family.  He has excellent credit and has paid all of his bills on time for about 50 years lol.. I know it will complicate things and is probably best to just be left alone.  After he spoke with his daughter, she advised it would be easier if he just left things as-is and we dealt with things when the time came.  He listens to her more than anyone else, so it looks like he'll just continue paying the high interest for the foreseeable future.  At least I can say I tried to help..

Rachel H. · Answer

@Troy Patt Sorry to hear about your mother passing away. Regarding your plan, I'd be very careful if you plan to move forward and receive rent from your stepfather. It can get sticky and complicated when you mix business and family. Going in, know that something may come up in the future and there's always the possibility your stepfather may not be able to pay you. It may complicate things.

If you're OK with that, just be sure to have everything in writing on what you agree on. If he has health issues, you may want to have an exit plan on exactly what you're going to do should he need additional help in the future and/or need to be relocated to a facility where his needs can be met.

Best of luck with everything!

Nicole Heasley Beitenman · Answer

When my father and I agreed I would buy his property, he added my name to the title, we waited 6 months, and then I did a HELOC and used the funds to pay him out. We then removed his name from the title. That being said, you mentioned that no banks are willing to refi. Is it because your stepfather's credit is an issue, or is there an issue with the property? If he can't refi, is there a possibility that you won't be able to either?

Troy P. · Answer

Thank you so much for the advice, @Jason Wray

Jason Wray · Answer

Troy,

First its great your helping your Father so either way its a win.  On the downside if you have never financed a Mobile home its not the same as a single family residence.  There are a number of VERY strict guide lines that govern Mobile/Manufactured homes which include year restrictions like cannot be older than 20 years or in most cases older that 1976.  Must be a double wide on a permanent foundation and in some states require hurricane tie downs, concrete pillars, and skirtings.  Must have been built on site and not moved from another property or location.

Those above are just for Primary residence when you get into second homes and investment non-owner occupant its almost impossible to get financing.