Wife's Grandma wants to sell her house

[Colton Witte]

My wife's grandma is wanting to move closer to family. Her house is located in a housing edition that is great for single family's or renting out to the local college students (the campus is within walking distance). She's asking a bit much for what the house is worth, but I can be ok with the price. I would like her to do a seller financed deal on her house and I get the conventional loan on the house she has up here and then she can rent that house. I believe that the rental can cover both the payments for the seller financed deal and the conventional. While it would be tight, my wife and I can support both rental payments if there isn't a renter in the one. I know this doesn't allow for major repairs or us making money. Our goal is to have heathy income stream once we retire. 

My father-in-law however does not like this proposal but doesn't have any explanation for why. I think he think's I'll be taking advantage of her, but I think it's a fair deal. Am I missing something?

[Randall Alan]

@Colton Witte

You haven't explained why you want to do what you want to do.  If you have the ability to buy a house where she is moving to, why wouldn't you just buy out her house conventionally?  It doesn't seem in the best interest of your grandmother.  (ie. Why would she want to rent when she could just sell her house conventionally and buy?). It seems convoluted... and puts you in the middle of both situations. I'm sort of on the Father-in-Law's side.  Sorry.  I get that it somewhat gives you two rentals... so yeah, there's that... but from a family perspective, I think you are better off not rocking the boat by putting your grandmother (and you) in an awkward situation.  Plus - keep in mind that from a lender perspective you have to qualify with debt to income ratios, etc on your conventional loan.  So it will get more complicated there as well.  But overall I think it's a bad idea just generally with family.  

All the best!

Randy

[Clayton Silva]

Not sure I follow the whole transaction thought process.  Typically someone is against seller financing because they want the cash up front rather than installments.  Also not sure, like @Randall Alan said, why she would agree to seller finance her house and then rent from you?  Doesn't seem like any net tangible benefit to her.  The common pitch for seller financing is tax advantages, but if she is selling her primary and she is single, she automatically gets 250k in equity tax free and 500k if married.

[Steven Foster Wilson]

Quote from @Colton Witte:

My wife's grandma is wanting to move closer to family. Her house is located in a housing edition that is great for single family's or renting out to the local college students (the campus is within walking distance). She's asking a bit much for what the house is worth, but I can be ok with the price. I would like her to do a seller financed deal on her house and I get the conventional loan on the house she has up here and then she can rent that house. I believe that the rental can cover both the payments for the seller financed deal and the conventional. While it would be tight, my wife and I can support both rental payments if there isn't a renter in the one. I know this doesn't allow for major repairs or us making money. Our goal is to have heathy income stream once we retire. 

My father-in-law however does not like this proposal but doesn't have any explanation for why. I think he think's I'll be taking advantage of her, but I think it's a fair deal. Am I missing something?

 Why would you get the conventional loan for her to move back? Can she not afford to buy something? Personally, I would not do this. I think there are a lot of better deals that you can get appreciation and cashflow. 

[Bill B.]

She’s not my wife but it certainly sounds like you’re taking advantage of her. 

You specifically say you think the rent you charge her can cover the mortgage on the property she’s renting and the seller financing payment on the home she’s selling. 

These two statements can’t both be true  

Why wouldn’t she just sell and buy the replacement home? She’d get an even better rate than you’re getting and still cashflowing while making 2 payments. So obviously she’d save boatloads per month and have a bank full of cash. 

What’s your motivation for doing it over than to take advantage of her?

If her current home is a dream rental property just buy it with a normal mortgage and let her find her own place. If the place you’re thinking of buying could really support such a huge rent that it will make the mortgage payment on two properties, you should buy it and rent to a stranger, not your MIL. If you aren’t willing to do those two things, she’s being taken advantage of. 

[Eliott Elias]

This sounds like a perfect opportunity to owner finance. Give grandma the value she wants and finance 100% of the property in return.

[Theresa Harris]

I agree with Randall. Just buy her current house using a mortgage from a bank and let her use that money to buy the new house closer to family.  It is much cleaner and simpler that way.

[Sherief Elbassuoni]

seems like a good seller financing opportunity. You can use the mortgage you get from the bank and buy her current house

[Colton Witte]

@Randall Alan, @Clayton Silva, @Bill B. I appreciate your replies! I truly am not trying to take advantage of her, I am trying to help make this situation a win-win for everyone involved. Not mentioned above was that she would live in the new house rent free and I would be responsible for the property upkeep. The value of her current house is less than the value of almost every house she's looked at in our area. 

I agree that the whole thing would be messy and convoluted. 

Again, I appreciate the feedback! I will just do the conventional loan for her house.