Single Family Home VS. Income Property

[Paul Huerta]

My grandmother wants out of her 5 bedroom house in Chicago. She would like to sell to me. But I've been wanting to purchase a cash-flowing income property (multi-unit) for myself, my daughter, and fiancee. The home needs A LOT of work as is but has the potential for a huge increase in equity if completely redone. Huge basement that if finished has the space for additional bedrooms and bathroom(s). I was thinking that i could buy, rehab, reappraise, and then use the equity to get a HELOC to purchase the multi-unit. Is this the smart move in this market? I would still have FHA eligibility because she would keep her name on the mortgage I would just be taking over the payments (less than what I pay in rent now) and all she wants is the difference of the appraised value vs. what she still owes (65k).

[Malcomb Stapel]

@Paul Huerta a good deal is a good deal. If you can make good money off of it and you have more than one exit strategy, why not pursue this a little further? Is this a desirable high rent area that you could do rent by the room? Can it be flipped for a big profit? Is it something you and your family would be happy living in, then use the equity to fund other investments? 

[Esta Ryder]

So there are a lot of things going on here and it is not quite as simple as it seems.

*If the house is in her name, she has to qualify for the HELOC based on her income, not yours. Is she comfortable with that? Would she qualify?

*What happens when she passes away down the road?  Is your investment in the property protected?

*What if she doesn't want you making any improvements to "her" home? I see this a lot.

You might have answers to all of these things.   I just have no way of knowing based on what I read in a forum.  I would talk to an estate planner, a lender, and your grandmother just to make sure that everything is as you are hoping and there are no negative surprises. Hopefully, it is a super easy and succesful experience for you :)