90 Year Old with a Dead House - 550k - How to Structure

[Timothy Michael Mick]

I have a 90 year old friend with a triplex. A few years ago, a pipe broke in the upstairs. She hired a family member to fix it but ran out of insurance money before he could complete it. Now the building is sitting there, down to the studs:

-550k House ARV

-3 units rental at $4500 to $5000

-140k owed on a mortgage

-105k renovation cost

Requirements:

Her

-No capital gains tax for entire sales price

Me

-Buy and hold

-Deed in my name upon her death

-Low Down, Monthly payment 2k to 3k

What is the creative way to structure this deal so that these requirements are met?

Here are the issues I see with standard ways of structuring this deal:

-Subject to existing financing – deed transfers immediately and she has to pay capital gains

-Executory Contract (Land Contract) – the deed does not transfer upon her death but goes to her family. The biggest risk to me is being taken to court by her family who will inherit the deed.

Is there some creative way such as setting up an irrevocable trust so that upon her death, I inherit deed to the property and her family inherits a note to what I still owe? (The issue I see with this is that 1. Capital Gains tax is triggered upon transfer of deed and I have to pay. 2. Due on sale – from mortgage (or could I inherit the mortgage as well)).

Any advice is helpful.

[Bill B.]

So she’s getting $4500-$5,000/mo now and you want to give her $2-3k and take the house instead? What’s her upside? Are you planning to pay her heirs upon death or are you saying you expect her to give you the house when she dies?  I’m no lawyer but I’m betting any sane person would call this elder abuse. You may not end up in jail but I bet you don’t end up owning the house. Or are you planning to pay off the bank and her heirs in full when she dies? TOD deeds are meant to go around probate to heirs, not effect the sale of a property. You can certainly buy with a lifetime use of the estate but that would only be relevant if she’s living there. 

Please just imagine she was your great grandma and treat her how you’d like her to be treated. I just can’t see giving her $30k a year for 2-3 years and then claiming the house when she dies going over well. Hopefully I misunderstood your intent and you misunderstood or poorly explained your used of a TOD.