Rental Property Investor · Denver, CO · Member since 2021 · 15 posts · 4 votes
I *finally* have though capital for a down payment on my first investment property. I plan on househacking a small multi family 2-4 units in CO. I own my current primary resident but will not be renting it out (my parents will live in this home when I leave and they will cover the mortgage). Long story short I purchased this home when I was 19 and single and they helped with the down payment and we agreed to live together. I now have a family and am ready to leave but they want to remain here.
I have a few questions/concerns:
1. How will my primary mortgage and taxes work when I move out and leave the home to my parents? Do we need a lease? Will this affect my approval for the next loan? How do I explain this to lenders?
2. What steps and in what order should I be taking to get closer to my first house hack besides the first step of getting pre-approved with a lender? (Opening bank account, registering an LLC, finding an attorney, connecting with an agent, etc.)
I know it's a lot to unpack. Any advice is appreciated.
Investor · Charleston, SC · Member since 2022 · 233 posts · 198 votes
4y
Erandi - Congrats on the progress!
1). Will likely be no change unless you are using a homestead exemption for tax purposes on your primary residence. I would get a lease, as that is how you will show you have income from this property when approaching your lenders, otherwise, it will look like you have debt but no offsetting income. The lease will also give your parents the documentation they need to deal with typical stuff like utilities etc without having to get you involved.
2). I'll leave this one to the house hacking pros.
Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
4y
@Erandi Lechuga I assume the mortgage of the first property is in your name? Did your parents cosign the loan as well? I would advise that you establish a lease for your parents. As @Jake Wiley mentioned, this will help lower your DTI ratio and furthermore assist your approval of obtaining a second mortgage. As far as practical steps to take to get closer to your first house hack and buying your second property, certainly, work with a resourceful real estate agent. Registering an LLC at this time is not necessary right away. Hope this helps!