Brother In Trouble Again.
My brother filed BK a few months ago, but he's still got his house. His mortgage balance is 54K. House appraises for 64K. His interest is something like 14% due to his past credit problems. I want to bail him out, but I'm not sure how to go about doing it. I would like to either sign for him on a new mortgage and get his payment down to a manageable amount, or buy his house outright and let him take care of the note. I can't let him lose this house because our mother has a motherinlaw apt there, too.
As my old friend Elvis use to say, "Be good to yo' momma" and I guess by extension your brother also.
He doesn't seem to be very good handling his financial affairs. I'd refinace the property to make the payments easier.. I would do it on the condition that you are the sole owner of the property and the only one on the mortgage. You make the payments each month. I'd bet that if he was on the deed for any length of time that he'd cloud the title with liens and judgments. If he made the mortgage payments they'd be late or non-existant. Your credit in a short time wouldn't be any better than his. If he doesn't go along with this then it's time to move mama and cut him loose.
ditto, I share the same advice..
Buy the house for the amt of the existing lien.. (54k)
You get financing on the house (now owned by you with deed in your name) in your own name at a good interest rate..
You make the payments each month and collect "rent" from your brother..
If you want to be nice and give him some safety (yoru brother), you could always give him an extensively long lease, i.e. 30 years.. so he knows legally that he will be able to "rent" the house for that long..
Chris
I agree with sammyvegas
I'd buy it yourself from him for the amount owed. Let him rent it from you, or buy it from you on a Lease Option.
I'll tell you now that this situation is very risky. Think through, and talk through, every possible scenario with him. Get an agreement IN WRITING that you both sign.
What if he's late on a payment?
-What if he makes partial payments
-What if he doesn't maintain the property?
-What if he can't purchase the home by the time the option period expires?
-What will happen to your relationship if you have to evict him?
It doesn't look like your brother is very financially wise. My guess is that he hasn't changed. He will most likely continue to be financially irresponsible, and you'll be caught in the middle.
I'd suggest the following: Buy the house for the amount owned. Rent it to SOMEONE ELSE for a year or two, and tell him you're going to be selling the house in 2 years to him or to someone else.
Thanks Gentlemen,
I'm tending to lean toward Sammy's suggestion.....Move Momma in, and let the other chips fall where they may. He's an open and shut case of what bad kharma can do for you.
CKY is right.
Don't loan family money, as inevitably these deals go bad, bad blood is created, the lender loses his money and it's a mess.
If you want, either give him the money, without expecting to get it back, or buy the RE from him for the amount of the debt, and charge him cheap rent to live there...but YOU control the RE so it's YOURS to manage, sell, etc..
Ditto,
However, I do think you need something in writing as to what happens if he doesn't pay.
Do you just put your brother out? How would your mother feel about that?
Do it by the book so there are NO misunderstandings.
Helping a family member out is great when they cant keep there end of a deal up to a stranger. Your a hero.
But, when they cant keep their end of the bargain up to you, your looking at a paradyme shift. You go from Hero to ZERO.
[addsig]
Buy the house from him with an interest
only loan due in 7 years. Rent back to him, however make him pay a property managment company so you dont have to chase the rent! Or, you could just kick him out all together and rent it out, keeping your mother there. Remember, money and blood do not mix!
Good Luck[ Edited by Jeffca on Date 01/11/2004 ]
My advice (worth every penny) is to find your mother an alternative place to live. The #1 rule of landlording is not to rent to family or friends. check out http://www.fabmansecrets.com/Articles/Real_Estate/5%20Imp%20RE%20Investing%20Lessons.htm - actually I think it is her # 2. I could not find the article where it was # 1. Also check out http://moneycentral.msn.com/content/Savinganddebt/Managedebt/P68952.asp?special=0401debt about the dangers of co-signing for a loan. Why would you want to put your brother right back into a situation that you know he can not afford? You are not helping him out.
My sister in-law is almost poverty and going through a divorace with a disabled child. I am a landlord but I told her that I would never be her landlord. Besides the fact that she is suit happy and has been the plantiff in several lawsuits ... It makes more sense for me to pay her rent than pay her mortgage. She can not afford a house nor can she afford the upkeep on a house so she should rent!! It might be important for you to own a house, but obviously it is not important to your brother. He just needs a place to live.
Brenda
You can rent to family. Just tell them they have to pay a property management
company, not you! Tell them you dont
want to mix business with family and hope they will understand. Make them play by all the rules everyone else plays by and it can work. It has for me.
Good Luck.
My cousin (NY) holds a steady job and wons her house. Her husband cannot hold a steady job but he is a big idea man; he thinks his next idea will hit it big. My cousin wants to invest in RE for her and her kids' future security and use her IRA to do the same. Over the long weekend she shared her fear with me, what if she does all that and her marriage with the bum (I mean big idea man) falls apart. I (jokingly)suggested she should look into a friendly state like Florida because OJ lives there on his retirement fund like a king even if there is a judgement on him. She did not take that as a joke and asked me to find out. How and where do I get information like that?
To protect your mother in this move her somewhere else or if she is paying your brother to live in the mother-in law apt. have her give you her rent every month. Then charge your brother the remainder remember to include taxes and insurance.But probably the only way I would buy this house is subject to the existing www.financing.Then it would only continue to hurt your brothers credit not your www.own.If he did not pay you then let the house go into foreclosure.