Financing a home for my Handyman... Tricky Situation

[Gunnar F.]

Hi, all.

My handyman/property manager lacks the ability to get home financing. Years ago I agreed that I would buy a home under my name, rent it to him, and figure out how to transfer title to him or to his young son when the home was paid off (possibly even in my will, if that is the only way to make it work).

Obviously, this was not something I did as a financial masterstroke. I have not been able to realize any meaningful profit on the arrangement. I was primarily motivated by the desire to assist him but nor am I running a charity, so to say, and he fully understands the benefit of being able to borrow my credit in this way. He also appreciates that I can offer him flexibility by not "foreclosing" on him when he cannot make rent on time, which happens a handful of times every year (though he always makes good).

Anyway, we still owe 85K on the house. I was thinking about paying the house off in full and then collecting the rent myself in an effort at least to get something out of the deal. I would appreciate any reactions/ideas/advice.

[Patti Robertson]

Did your formalize this arrangement with a purchase option, land contract, contract for deed, etc? Or is he in a regular lease? Do you have him paying the taxes and insurance also? If not, you should be. That will help it be profitable for you. I've done this several times, and have used either a purchase option along with a lease or a land contract. Sometimes I keep the payments low, and agree to pay for materials if they fix up the house. Sometimes they are responsible for all improvements. Either way, I reserve the right to approve all structural changes. You didn't share enough about the finances to help us advise you. What is your interest rate? What is your monthly payment, inc taxes and insurance? How much is the tenant paying? What is the ARV of the house?