Took Over House/ How do I leverage it.

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Took Over House/ How do I leverage it.

Carlos Martinez
Investor · El Paso, TX · Member since 2016 · 22 posts · 7 votes

Hello. Couldn't write much on the description but here is the situation but first a quick background. I own a 4-plex and I self manage so I have some experience. 

My family and I live in a house (El Paso, Texas) we are renting from my brother in law (2+ years) and today he told us he is willing to transfer the title to my name without me having to give him any money at all or paying him anything in return. He is going to live to Mexico and doesn't want anything to do with it. The current house value is around 95k (I'm being conservative). I haven't really put in any money into it because it isn't mine yet but I can easily get it up to market value 110k with simple upgrades. It us currently on a 15 year fixed mortgage and around 50k is still owed on it.  We want to keep it and rent it out.

My plan, if possible, is to get it under my name, get a home equity loan on a 30yr fixed mortgage and use that money to purchase our own home (down payment)  that we actually like or another rental property. 

My question is, can this be done?  Can I get a warranty deed even if money is still owed on it or how would I go about putting the title under my name?

Or are there other better options to go about taking advantage of this situation.

Thank You!

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Mike ReynoldsPro Member
construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
9y
Originally posted by @Carlos Martinez:

Hello. Couldn't write much on the description but here is the situation but first a quick background. I own a 4-plex and I self manage so I have some experience. 

My family and I live in a house (El Paso, Texas) we are renting from my brother in law (2+ years) and today he told us he is willing to transfer the title to my name without me having to give him any money at all or paying him anything in return. He is going to live to Mexico and doesn't want anything to do with it. The current house value is around 95k (I'm being conservative). I haven't really put in any money into it because it isn't mine yet but I can easily get it up to market value 110k with simple upgrades. It us currently on a 15 year fixed mortgage and around 50k is still owed on it.  We want to keep it and rent it out.

My plan, if possible, is to get it under my name, get a home equity loan on a 30yr fixed mortgage and use that money to purchase our own home (down payment)  that we actually like or another rental property. 

My question is, can this be done?  Can I get a warranty deed even if money is still owed on it or how would I go about putting the title under my name?

Or are there other better options to go about taking advantage of this situation.

Thank You!

 Jim is correct. I did this very same thing with my personal residence. It was my father's house and he retired at the coast. Instead of waiting for probate he signed the deed over to me fir the cost of a title check. Then I refinanced it and payed him for the house. Kept was was left. 

It was win/win. Except taxes went up because I'm not retired yet. He got money for his house and I don't have to worry with probate. 

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  • Glenn Treadwell
    Investor · Grovetown, GA · Member since 2016 · 13 posts · 8 votes
    9y

    Hello Carlos,

        Hopefully someone with more knowledge than me will give you advice.  To me, you would definitely want to get it in your name by getting financing and going through normal RE closing (title search, termite inspection, etc.) to purchase 4plex from your brother-in-law for the $50,000 he still owes on it. That way it is in your name and you can have the insurance on it and pay the taxes, handle the tenant rental leases as owner, etc., and benefit from depreciation on your taxes. Probably others ways to handle but I am not sure at this point in my studying RE investing what they are. 

    0Reply
  • Jim Jopling
    Real Estate Investor · El Paso, TX · Member since 2017 · 47 posts · 23 votes
    9y

    I doubt that you will be able to get the HEL unless you first get the first mortgage in your name and have your brother transfer title to you. This means closing costs for the first mortgage and the HEL. Otherwise, you can just have your brother transfer title to you, subject to his first mortgage. As long as you are paying that mortgage directly, you should be okay. But that transaction could *possibly* trigger the due-on-sale clause in your brother's mortgage. My understanding is that the banks usually do not take the property under the DOS clause as long as they are getting paid, but that risk is still there.

    It sounds like one option may be to get your brother to take out the HEL before he moves to Mexico, then loan those funds to you. You pay him back by paying the HEL directly. Your brother is basically risk free  because a Texas HEL has no personal recourse. In other words, the only thing the bank can do is foreclose - they cannot come after you for unsecured portion of the HEL.

    Good luck putting this deal together. I hope it works out.

    1Reply
  • Mike ReynoldsPro Member
    construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Carlos Martinez:

    Hello. Couldn't write much on the description but here is the situation but first a quick background. I own a 4-plex and I self manage so I have some experience. 

    My family and I live in a house (El Paso, Texas) we are renting from my brother in law (2+ years) and today he told us he is willing to transfer the title to my name without me having to give him any money at all or paying him anything in return. He is going to live to Mexico and doesn't want anything to do with it. The current house value is around 95k (I'm being conservative). I haven't really put in any money into it because it isn't mine yet but I can easily get it up to market value 110k with simple upgrades. It us currently on a 15 year fixed mortgage and around 50k is still owed on it.  We want to keep it and rent it out.

    My plan, if possible, is to get it under my name, get a home equity loan on a 30yr fixed mortgage and use that money to purchase our own home (down payment)  that we actually like or another rental property. 

    My question is, can this be done?  Can I get a warranty deed even if money is still owed on it or how would I go about putting the title under my name?

    Or are there other better options to go about taking advantage of this situation.

    Thank You!

     Jim is correct. I did this very same thing with my personal residence. It was my father's house and he retired at the coast. Instead of waiting for probate he signed the deed over to me fir the cost of a title check. Then I refinanced it and payed him for the house. Kept was was left. 

    It was win/win. Except taxes went up because I'm not retired yet. He got money for his house and I don't have to worry with probate. 

    2Reply
  • Sean Carroll
    Investor · San Jose, CA · Member since 2017 · 453 posts · 254 votes
    9y

    @Carlos Martinez I would look at doing a refi or a cash out refi on the propert 

    0Reply
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