Seller Financing a house that is free and clear

[James Nidiffer]

My mom owns a $200k house free and clear. She has a tenant in the house for the last 4 years. She is willing to allow my sister and me to use the equity in the house to seed our real-estate portfolio. We are trying to understand the best way to pull out the funds. She would really prefer not to take about a loan as she hates the banks being 'all up in her business.' If she gifts the property to us then we are over the $30k gift allowance for 2021. Would seller financing to our LLC be an option? Or there other options that limit her interaction with the bank and avoid a significant tax event? I'm grateful for the thoughts of the group. Jim

[David A Lisowski]

@James Nidiffer

Get you and your sister on title.

Wait 6 months (or 12 months) seasoning requirement.

Apply for cash-out refinance or HELOC (it would be labeled as an investment property).

Your mother, still on title, will have to sign paperwork for the loan, but doesn't have to be listed as a borrower on the loan.

Otherwise, there aren't any other "work-arounds," that are legal, that I know of.