Gift of Equity Home Purchase Advice

[Randy Noble]

Hi Everyone,

I'm new to the site and have been wanting to get into real estate investing for awhile now. I had planned to start up once I had saved more capital but I've recently been provided the opportunity to purchase my mothers house from her and I'm looking for the best way to structure the loan and handle the purchase.

The house is in pretty bad shape and will need foundation work, roof, plumbing, sheet rock work, gutters, paint, carpet, cabinets, etc... I have around 30k that could be used for the remodel.

It appraised for $130k in 2015 when she refinanced it on a 15 year mortgage. She has around 93k remaining on the balance of the loan. She will be gifting me all of the equity that she has in the house. I'd want to get a conventional 30 year mortgage and finance the remainder of the balance on the house. Credit and income are not an issue.

We were in the process of selling our current house ($100k equity) so we were thinking we could purchase her house, do the remodel, sell our house and then move in with her for a year and split the rent while we work on finding her a more manageable place. After a year, either sell the new house or rent it out. Similar homes in the area in good shape are selling between 160k-180k and rent for between $1600 and $1800.

I'd be interested in hearing what others would consider doing here. 

I'm also unsure of how the gift of equity works and what the selling price should be in the purchase agreement since she is essentially wanting to give me the house. Should I list the purchase price as the appraisal value or should another number be used here, etc...?

Thanks in advance.