AITD Vs Contract For Deed.
I am purchasing a home from my father-in-law, subject to his existing mortgage 136K @ 4% and including a second held by him for 30K @7%.
He would like to do a Contraact for Deed, but my education up to now makes me lean more towards an All Inclusive Trust Deed instead.
Incidentally, he is in poor health and may kick the bucket in the next 5-10 years. We may have him QCD the property to his trust and then purchase it from the trust instead of from him.
Can anyone lend some insight as to which would be more beneficial to me, and what, if any, the different tax, ownership, or refinancing implications may be?
Are there any aspects of either of these which I should be concerned with and/or which make one more desireable than the other?
Thanks!
You would be better off with a AITD or giving him a direct second mortgage on the property and you paying the first directly. He would be better off collecting the entire payment from you and paying the first and keeping the difference. I believe both would be better of actually with a transfer into you name or setting up a trust where it is out of his name and eventually will be your wifes and your property. There are all kinds of things to consider for him like if you and his daughter split and he wants her to keep the house which he may want to do if he is a control freak.
From what I have heard at least in Texas there are new laws that make it more difficult for a contract for deed to be inforced upon default. Court action is needed instead of a simple trustee sale at the court house. Most investors I know are doing the note and deed of trust thing as of late instead of the CFD.
As far as taxes I believe there is no difference. He has to tread both as a sale and would pay income tax on interest and capital gains tax on any profit realized.
Hope this helps some
Ted Jr