Buying house from my mom and renting it back to her

[Nathan Trotter]

Long story short, I am trying to run scenarios for purchasing my moms home from her and renting it back to her. Her current mortgage is 200k but she could probably sell as is for 325-350k. It could use a lot of updating but she could not afford to make the updates. She can’t afford a higher monthly payment and would prefer not to do a cash out refi. Her loan is not assumable.

The thought is that I could buy the house at her current mortgage rate and then rent the house back to her at a discount for a couple years so that she has a little more financial breathing room. I would also redo the floors, kitchen and backyard (est. 40-50k improvements) within a reasonable time frame.

She would get cheaper monthly payment and an updated house that she can enjoy more. I would be getting a good chunk of equity.

My question is: does anyone have any creative ideas on how we could structure this deal? This will be my first “investment home” and it’s obviously not a traditional route in that I would be negative cash flowing for a while with a good amount invested up front. Keep in mind I’m trying to help my mom, but I also want to make sure it’s a good deal long term for me.

Another thought would be to buy it for 250k with the idea that she would hand over the 50k payout to us to use for the improvements.

Any thoughts appreciated!

[John Carbone]

Quote from @Nathan Trotter:

Long story short, I am trying to run scenarios for purchasing my moms home from her and renting it back to her. Her current mortgage is 200k but she could probably sell as is for 325-350k. It could use a lot of updating but she could not afford to make the updates. She can’t afford a higher monthly payment and would prefer not to do a cash out refi. Her loan is not assumable.

The thought is that I could buy the house at her current mortgage rate and then rent the house back to her at a discount for a couple years so that she has a little more financial breathing room. I would also redo the floors, kitchen and backyard (est. 40-50k improvements) within a reasonable time frame.

She would get cheaper monthly payment and an updated house that she can enjoy more. I would be getting a good chunk of equity.

My question is: does anyone have any creative ideas on how we could structure this deal? This will be my first “investment home” and it’s obviously not a traditional route in that I would be negative cash flowing for a while with a good amount invested up front. Keep in mind I’m trying to help my mom, but I also want to make sure it’s a good deal long term for me.

Another thought would be to buy it for 250k with the idea that she would hand over the 50k payout to us to use for the improvements.

Any thoughts appreciated!

Look up mark j Koehler (sp?)…he has a topic on this. Essentially I think anything below FMV each year can be treated as a gift from you to her as long as it’s under the 14k a year. And you should still get the deductions.