Best Way To Purchase A Combo Investment/personal Home?
I'm in college and I'd like to get started early in REI. Since I am only working part-time, my income is fairly low right now.
I have noticed that if I were to purchase a house, I can easily get 3 roomates to pay around $300 or more in rent each, more than covering mortgage payments and property taxes, and allowing me to live essentially rent-free. Obviously there would be more maintenence and whatnot than if I just lived in an apartment, but I am definitely up to the task.
Now for the question... what would be the best way to go about this? I think with my current income level, despite the ability to get roommates, I will not qualify for much of a mortgage loan. The way I see it, I have at least two options:
1) Have parents co-sign on the loan. They have absolutely no problem doing this, but I'm not sure if I would get the best possible rate this way.
2) Put down a down payment and have the loan actually taken out by my parents. I would then simply pay them the mortgage payments. This wouldn't be a big deal, except I would lose the tax benefits since I wouldn't be the actual mortgage holder.
Which would be the better way to go? If I went with option 2, do you think it would be possible for the mortgage to be taken over by myself at some time in the future? Sort of like subject-to, I suppose? I would like to eventually be in this totally on my own without help from the parents.
BTW, I have over $30,000 saved up which I could use for part of a down payment and other costs. I'm looking in the $100K range, and have plenty of time so I am going to focus on motivated sellers so that I can get a better deal.
Thanks for any input you can provide!
If you are employed you can could possibly get a stated income loan, or if your credit is good you could get a 100% no-doc loan (if owner occupied). I can help you with this, send me a private message if interested.
If you have a good credit score, maybe you could get a NO-Doc financing in your own name, assuming you are of age, and due to the fact that you will be living there. Your $30,000 in savings would be proof enough that you can make the note. No need to tell them about the roommates. The interest rate might be a tad higher, but hey, you'll have roommates. Of course, Mom and Dad's signatures would always work.
Your best bet is to have your parents buy the house as a 2nd home and you pay the mortgage. Keep records of the payments you make, then in about 1yr, have your parents sell to you using a gift of equity. W/ 12mo record of mortgage payment and parents gifting you equity, you could easily apply for a mortgage under your name then and get better rates. Based on your scenario, you would need to put too much down now and have a higher rate, then if your parents would buy and then sell to you in 1 year. Keep the down payment for other investment opportunities.
Quote:
On 2003-11-09 22:18, jmBROKEr wrote:
Your best bet is to have your parents buy the house as a 2nd home and you pay the mortgage. Keep records of the payments you make, then in about 1yr, have your parents sell to you using a gift of equity. W/ 12mo record of mortgage payment and parents gifting you equity, you could easily apply for a mortgage under your name then and get better rates. Based on your scenario, you would need to put too much down now and have a higher rate, then if your parents would buy and then sell to you in 1 year. Keep the down payment for other investment opportunities.
Thanks, I was thinking that this would probably be the way to go. In this scenario, even though I am paying the mortgage, would I be unable to gain any tax benefits since the mortgage is not in my name? Conversely, would the parents be able to gain these tax benefits? What about tax write-offs like depreciation, utilities, maintenance, etc. on the portion of the house used as "investment?" Would I be better off not worrying about that until the house is completely in my own name?
Thanks!
Quick bump to this thread....
Also, does anyone know what type of rate my parents might be able to get if they take out a mortgage on the house as a "second home?" Basically, would it be a lower rate than an "investor-rate" loan?
Yeah second house rates are much better. Only slightly higher than primary.