Newbie in Houston Needing Help with 1st Investment

[Krystal Jones]

Hello Everyone!  

I've been lurking on BP and watching the podcasts/seminars for a little while now and I am excited to get started in investing.

I will try to keep this short and sweet...

My mom owes $65,000 on her home (SFH 3/2), currently appraising for $120,000 as-is.

Current mortgage payment is $500 a month with rents in  the area in the $1200 - $1350 Range

Home needs $35,000 - $40,000 in rehab (based on 3 estimates) .

A similar home, okay finishes recently sold for between $160,000 - $185,000

Unfortunately, my mom is disabled and isn't in a financial position to get the home repaired and wouldn't qualify for any type of loan due to credit issues as well.

She's willing to sell me the home and willing to loan me the profits of the sale to kick off our investment portfolio.  If I buy has her daughter, I will have to pay fair market value to avoid gift taxes (Right?).  We also both live in the home, not sure if that matters. 

My investment strategy is to buy & hold.  Any advice on how to add her property to my portfolio would be greatly appreciated!

My main questions are:

• Do I need a realtor? I'm thinking I can get this done with a Real Estate Attorney.  Suggestions?
• What type of home loan/financing options should I seek? Getting approved should not be an issue and down payment if necessary is also available.

[Account Closed]

Gift Tax does not enter into the consideration.

Here's what you could do.

Mom sells the house to you using what is called a WrapAround.  That means that her financing stays in place.

The price is $120,000.  

Your note payment to her is $1,200 per month.

She uses $600 to make her loan payments, and pays you the other $600 as rent for 1/2 of the house.

This $600 is rental income to you, but you can deduct $180 as depreciation for 1/2 the house, and deduct 1/2 of the utilities, taxes and insurance.

Work out the details with real numbers and then go see a Real Estate Attorney to draw up the documents, Warranty Deed With Vendor's Lien, Deed of Trust, Real Estate Lien Note, and Rental Agreement.

Your only out-of-pocket expenses will be the legal fees and document recording fees.

Your monthly costs should be about $900.

I hope this helps.

Good Luck.

Say Hello to Mom.