Here is the idea. My grandmother has a duplex that she has owned for 38 years. Free and clear since 1982. I help her find and manage tenants currently and she talks about me buying it from her. Here is the problem with me buying it, she wants $140K for the porperty. No cashflow at that price and it is currently assessed at $85K. I offer to buy it for $60K with financing form my Credit Union, I can get loan for 80% of the assessed value in Scott County Iowa. At $60K purchase price I can gain control of the property for NO MONEY DOWN!!! But, Grandma will not sell for that amount.
So for a solution this is my proposal to my Grandmother. If she Gifts the property to me with a Warranty Deed (free and clear title in Iowa) I would then pull out a loan of $60K. There will be about $450 of Cashflow monthly after being refinanced. I take that $60K and by using the skills taught by Dean and Matt I do Buy, Fix, Sell, or Buy, Fix, Rent, Refi.
To pay back Grandma I pay her a percentage of the profit from completed deals, and we split the cashflow on the properties that are held for rental.
So how does that sound? My questions are legal/financial questions. If I am gifted what taxes do I pay or can I buy her property for $1?
The next thought to move forward is partnering with grandma? I will ask my accountant and attorney about this, but for now I am looking for ideas. If we partners how could that be done so our profits are properly recored and our tax liabilities are figured out? LLC, LP, etc?
Or should we both be on the title she has now instead of gifting it or selling it for $1 to me? If that were done then we would get a loan together and proceed with investing.
My only largest concern with doing all of this is that I wan't as much control as possible. It is amazing how much we learn as we grow older. I never knew that my Grandmother really Invested as much as she does in Real Estate. She is no Dean Graziosi, but she does know a thing or to. She tested me at a recent wedding reception by asking me;
"How do you sign a contract?" She asked,
"And or Assigns, Everytime!" I stated,
She clapped her hands and stated that I am the only one of her Grandchilderen and Children that have taken Real Estate Investing this serious. I found out that about 40 years ago she did an assignment of contract on a farm! She does know a thing or two about real estate, but not when it comes to rehabbing or properly screening tenants (38 years and never once completed a background check). This is why I want to pilot the ship and let her put the coal in the fire.
I know it is a long post, and I know I will get alot of answers when I talk to the professionals on my power team, but I greatly appreciate any insight on talking to attorneys, accountants, and ideas about structering a partnership. I will keep everyone posted on the answers i recieve.
Quad City Real Estate Investors Association
Here is the proof of getting a loan to buy a deal with a 585 Credit Score.
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