Rent to Own

[Beth Sanchez]

Hi Everyone,

I'm new to the forums, but have been following Bigger Pockets Podcast and Youtube channels and love what I've been learning. I have kind of a personal question and I hope that's OK to put here. My Grandpa just passed away and my we are concerned for my Grandma living alone as she tends to fall easily now days and needs a little more help. There is a home right next to my Grandma's that just went up for sale but is bank owned. My husband and I are currently on another mortgage with his parents kind of as an investment property with a tenant renting it at the moment. We tried to qualify for a mortgage, but because of the other property to our names and too low of income, we were rejected. We are trying to figure out a creative way to get in this house next to my Grandma with out the typical mortgage. My grandma is willing to help out to get us closer and we were talking about her buying the property and then us renting to own it. Our only concern is does this get hairy if she passes away before we get it refinanced under our own names? Anyone have any suggestions or maybe a lawyer is more what we need to talk to?

Thank you so much for any advice! Looking forward to learn more on here and one day get further into real estate investing!

[Michael Gansberg]

Hi Beth,

If I were in your shoes, I think the least messy way to do it is as follows:

Your grandma purchases the home(I'm assuming from your question that your grandma can purchase this home with cash. If that's not the case, my answer will be pretty worthless to you.) She then turns around and sells it to you, and she gives you a mortgage.

So for the sake of argument, let's say she buys the home for $100,000 in cash. She then sells it to you for $100,000, and asks for a certain percent down- let's call it 10%. You give her $10k, and have a mortgage of $90,000, the terms(interest rate and duration) to be decided upon by you and your grandma. Grandma will benefit from having a monthly interest and principal payment from you, which I'm sure will be nice if she no longer is in the work force.

If she passes away at any point during the mortgage, you'll still be responsible for making the mortgage payments to her estate.

While this is the least messy way I can see to accomplish this, it's far from clean. I'd recommend an attorney for granny and one for you as well if you decide to pursue this course of action, good luck with this,

Michael