Buying a rental subject to owners existing mortgage

[Vincent M.]

Hi Bigger Pockets 

I am looking to buy my first rental. The property we are looking at is offered subject to the existing owners mortgage of 55,039.00. 

All of the number for cash flow and returns look good. My questions are:

1) Tax deductions: Buying subject to, who gets to write off the interest on the loan since its in his name and who gets to depreciate the property?

2) Is creating a trust to transfer the property to me when the mortgage is payed off the best way to protect myself. 

3) Any advise of what to look out for and avoid would be greatly appreciated. 

Thanks in advance for your input. 

Vince

[Marcia Maynard]

I've not done what you are planning to do, so I would seek the services of top notch experts in real estate law and tax preparation.

As you know, it's riskier buying a property subject to the existing owner's mortgage, as the loan would stay in the current owner's name, but you would be making the payments, in most cases without the bank knowing. The benefit is you don't have to qualify for a loan and won't be facing potentially higher interest rates and loan origination fees. There's the risk the loan could be called by the bank, accelerated by the bank, or the bank will require you to assume the loan in your name and charge you an assumption fee for the transfer, plus require you to qualify.

Contact BP member Jason Hanson, as "Subject-To" purchases are his passion. He wrote a BP blog: "Super Important Clauses For Your Subject-To Contract". Here's the link:

https://www.biggerpockets.com/renewsblog/2008/10/0...

Also, I suggest you post your question under the Buying and Selling Real Estate Discussion Forum and/or the Creative Real Estate Financing Forum, as more people who have experience with Subject-To purchases will likely see it.

Good luck!