All Forum Posts by: Megan Lawson

Hi folks! Looking for some advice. I am purchasing a property and only have half the money required for the downpayment. My parents are going to contribute the other half. My husband and I qualify for the loan ourselves, so they will not be on the mortgage and we are showing their contribution as a "gift" to the lender. 

My parents don't want to structure it as a loan because they do not want any more income or to be put in a higher tax bracket. Therefore, we've agreed to split the appreciation growth of the property (with full disclosure that this is speculative, but we believe we are in an appreciating market). We don't want to split the equity growth because we'll be the ones servicing the debt and paying down the mortgage, thereby creating more equity as time goes on. 

A few questions:

1. If we are the ones paying 100% for improvements to the property that creates appreciation (i.e. redo the kitchen or bathrooms), how do we account for this?

2. How should we structure this legally? Do we record this in some way on the title, or create some sort of side agreement? 

3. What are some options for their ability to request repayment of their contribution plus their portion of the appreciation? Ideally, this will be a long term buy and hold property (and the money contributed by my parents would eventually become part of our inheritance anyways), but they want assurance that in the case of some medical emergency or time of need in the future they could get the money back? 

4. We have negotiated a purchase price that is $100K less than the appraisal came back at, so we have $100K of equity in the property, plus our 20% downpayment from the start. Do my parents automatically have 50% of the total equity at the start, or only future appreciation above the appraised value?   

Any advice or thoughts would be greatly appreciated! TIA. 

Hi Dave. Yes, the short answer is that it is a dead end. My husband works for a company that invests in cell phone tower leases and can give you more info if you want - send me a PM for his contact. 

@Account Closed Thanks for the recommendations. We'll hold out until we can qualify for another conventional loan. 

@Steve Cook I'm wondering how you are structuring your Friends & Family deal. Are they partners in the investment? Or are you treating them like private lenders and paying them a rate of return on their money? After we build out our portfolio a bit more and feel we have a solid model we are interested in pursuing a similar option since we have friends and family with capital and interest in investing. Also, wondering if in all of your research you came across a lender you think would be a good option for purchasing 5-10 SFR in the 120K-150K range each if we have 20-25% cash (we're looking to purchase in FL). TIA!

Definitely to travel whenever I want and not just for my allowed 2 weeks per year! And to be more present for my children. 

Also, I want to prove to myself that I can break free from the mentality that the only way to get ahead in life is to work a 9-5 and put all your money in savings. Good work ethics and lots of savings has gotten me to where I am today, but now its time for my money to start working for me. 

Hi. My husband and I have spent the past three years "feeling out" the real estate investment game and are ready to get more serious. We have purchased three different properties in three years - all in different markets with different teams and different property types. We are San Diego natives (but actually currently based in Sydney, Australia for 2 years) so planning to invest outside our local market. We've narrowed down what investment type we think best suits our goals and found a market that fits our needs (looking to invest in SFR in the 120K-150K range A/B+ neighborhoods with rents 1% or greater the purchase price and build up a portfolio of about 15 properties to reach financial freedom).

We have bought each of the three properties we own with 20-25% down payments and have conventional 30 year fixed term mortgages (2 Fannie/Freddie loans and one private loan). On the last property, we were close to maxing out our debt to income allowed ratio per the lenders standards, so even though we have enough for 25% downpayment for another 2-3 properties, we aren't sure whether we'll qualify for more conventional loans (although we have no debts other than the 3 rental properties, and had 2 years of tax returns showing the properties we owned as cash flowing rentals; and we have 120K+ yearly W2 income, so not sure why we don't qualify for more). 

So, in summary, we have about 100K cash and 150K in equity in one of the homes - what are our next best steps to maximize our returns and continue buying properties? Do we start looking at portfolio lenders (will they be more flexible with our debt to income ratios)? Do we pull out some equity from our one property and buy one more house using all cash, then wait until we can save up more money and buy then next, then the next, and just build slowly? Do we keep pushing to find conventional 30 year mortgages until we max out (at 4 or 10? - I can't figure out which it is). We'd love some thoughts from folks with a little more experience. Thanks in advance for reading my long post and taking the time to provide advice! And if anyone has Australia on their bucket list I love giving travel advice!  

Thank you both for the response! Does a buyer typically provide the seller with an Estoppel certificate and ask them to have their tenants complete them, or is the seller responsible for providing their own Estoppel? 

Hi all. This is my first post, but I've been following the forums for a few months now. My husband and I are currently in negotiations on an offer for a triplex in Akron, Ohio. Prior to making an offer the seller's agent informed us that the units were currently rented with long-term tenants - two of the units at $575 each and the third for $375. As part of our initial offer, we included a clause requesting copies of the existing leases and proof of the past three months rent. The seller (via the real estate agent) replied that there are no leases - past or present - and that the rents are paid via money order so he has no record. Then, the next day he sent copies of checks for some months for two of the units. The checks for one of the unit were for $575 and $1000 (he mentioned that the tenant had paid ahead). The other unit had a check for $400 for one month, then two checks for $200 each for the next month (one which was paid halfway through the month) and then $400 for another month. The seller noted that the tenant had a $30 debt. This information has left us confused as to what actual rents are. We asked to speak directly with the seller to clear things up, but he has declined. He is still insisting that there are no leases and never have been. The lack of information and conflicting information are red flags and we are inclined to walk away from the deal. However, even based on our purchase price negotiations and even if rent on one of the units was $400 rather than $575 we would have an ROI of about 35% and net income of $450+/month, which to us is a very good deal. Should we add a clause to the contract that a lease must be in place before closing or the tenants must vacate the property? Or should we walk and wait for a property where everything lines up? The tour of the property suggests that they are good tenants - the place is in great shape, units are very clean and there is even a vegetable garden in the yard that the tenants maintain. We appreciate in advance any advice folks might have on how we could proceed with this deal while protecting ourselves.