Need advice on potential investment property

I know a couple who bought a 2nd property (2 BR/2 BA condo) for their cousins less than one year ago. They did 100% financing (80/20 I/O) and their cousins are responsible for paying the mortgage as well as the property taxes. The cousins aren’t on title nor are they on the loan because of their poor credit.

The couple wants off the title and doesn’t want the loan hanging over their heads since their cousins are having a hard time making their payments.

I was going to propose to them that I’ll go on title for a few months and then refinance under my name and credit. They will no longer be responsible for the loan and will then be quit claimed off title.

The cousins will pay me directly and I’ll pay the new lender myself as to protect myself and credit.

My question is: what other risks are involved? Would I have to pay any transfer of sales or additonal fees? Also, would I pay the original property taxes or would I be subjected to new taxes since I took over the property?

Any advice and answers to my questions would be greatly appreciated.

Thank you!

Howdy Mikita:

This kind of sale where you are getting the deed without paying off the mortgage has very few closing costs.

The only risks are in not collecting the payments as you know and then the lender calling note because of the due on sale clause . This is not that big of a problem if you plan on refinancing any way and probably not at all even if not refinancing.

The biggest expense would be a title policy if you decide to purchase one. At lease get a title search done.

Get a Warranty deed and not a quick claim from the title holders.

Taxes are negotiable between the 3 of you. Make sure 2004 taxes have been paid. You may want to get credit if not and also for the prorated share of 2005. Just know what you are on the hook for either way you do the taxes.

I am not sure what you mean by original and new taxes. The sale will not change the property taxes.

Hope this helps


What’s the value of the Condo? How was the appreciation over the past few years?

The place is too new to have that much equity in it. What are you planning on doing with it? I hope you are not just going to rent it out to the current deadbeats. Do the current deadbeats have a lease? I personally wouldn’t touch this one with a ten foot pole. I wount walk if not run away from this.