Helping Daughter Buy a House

[Jon A.]

Our daughter is moving from Washington state to Albuquerque. She'll be retaining her old home as a rental. Her new job won't be starting until August. So, I was surprised when she told my wife that she had been qualified for a home loan in NM.

Last night we got more of the story. It turns out that she found an agent that told her she can get a 10% down interest only for one year deal. I've studied enough here to realize that this could be a legitimate deal with a HML and maybe a flipper. Anyway I still advised her "no" because I realized that we could do the same type of deal to help her and offer her more protection.

We won't income qualify for our own loan, lack of history. But, because our investment discussions with a member here fell apart, we have enough cash to do her deal.

So, since this will be new ground for us, we need some advice. How to structure this? The mechanics of the deal?

My first thoughts...

Find a house that needs lipstick.
Offer 70-80% of ARV.
Big EMD with inspection.
Cash offer / Fast close.
"Rent" to daughter for 8-10% of investment.
Daughter fixes it up.
"Sell" to daughter when she qualifies in 6-18 months.

Let the questions begin.

And, thank you to all that take the time to read this.

jon

[Elizabeth Colegrove]

I would buy it and rent it to your daughter at fair market value. In order for you to count it as a rental on your taxes, you have to charge her as much as a stranger. When she is able to qualify for a loan. Decide on a price and sell it to her. In order to keep things as straight forward as possible. I would not make her fixing anything up as part of the agreement.