Subject to vs joint tenant

I am at the very beginning of my journey. In fact I’m still in the reading everything I can get my hands on phase. In addition to getting myself educated on the basics, I am also doing my best to save as much $$ as possible so that I have reserves and more options (like being able to put 20% down if a hard money lender requires it).

I have whittled down all my spending but now I need to deal with my biggest expense – housing. I moved in with my parents two years ago because they are in their eighties and can no longer take care of themselves. I pay their PITI, utilities, and all repairs. I’d like to put the house in my name (I’m the only child) so that I can take the tax advantages and be able to put more money towards my goal. I also want to rent the fully finished basement and be able to take depreciation on that part of the house, not to mention the extra income. My parents are OK with all this.

However, I don’t want to take a loan out to buy their house. I don’t want to tie up what I’ve been able to save. What are my options for purchasing their home (or getting equitable interest, at least)?

I’m thinking I could get it subject to the existing financing since I’ve basically taken over the payments anyway. My other option is just to add myself as a joint tenant but I don’t know if that would allow me to take all the homeowner deductions.

I know this isn’t a “deal,” and I apologize if I shouldn’t have posted it here. It’s just that I think if I can figure out how to take this step I believe I could be so much closer to where I need to be. I thank you in advance for any advice.

You definitely need to talk to a tax attorney, or CPA to figure out what the tax liabilities are to you adding yourself to the title (which is easy to do) prior to the passing of your parents. There’s gonna be some “basis” valuation in that transfer, or inclusion of equitable interest that you’re introducing to the title.

You and your parents need to establish a living will, outlining the arrangements you all want to make, prior to and after death.

Otherwise, renting the basement has little to do with depreciation that I’m aware of ( I could be wrong here), but the income is still income. The tax treatment you achieve will likely be the same as if you owned a duplex and were renting out one side, and living in the other side.

That’s all I’ve got. Let us know what happens.

I agree that your best bet is to talk to an estate/tax attorney or CPA to see what is in your best interests. If the property transfers to your name for the amount of the mortgage and their mortgage is then paid off, you may be able to use some of the equity in the home to pay for the loan origination fees and closing costs. So no out of pocket costs. Check to see if having this mortgage in your name has any effect on getting a future loan for an investment property.

It may be better off to create a living will and just rent the basement. You benefit from the rental income, you have no debt attached to your name and you just forfeit the small depreciation amount and interest payment on your taxes.

I really appreciate you taking the time to share your wisdom with me. I made an appointment to speak to a CPA today. My status is whatever is below newbie, but I sincerely believe this is a viable business and I want to learn all I can. In the meantime, I want to be able to build up some cash. I know all the gurus talk about is “no credit, no money out of your pocket” but that’s just silly. That’s the same as all the books that tout real estate investing as the way to easy, no work riches. I know there are dues to be paid. I appreciate the way you guys take time out of your business – that you really are doing, not just selling a book about – to help those of us who are just starting out.

You’re welcome…!

That’s what these forums are for. You are welcome to ask any real estate related question and we will do our best to give you some helpful advice. It is always a breath of fresh air to find someone willing to learn and that sees through all the real estate jargon junk to see what it really is: a good old fashioned way to make a living and hopefully some hard earned wealth down the road. Good luck to you!

Before you go to all the other expenses…google…Garn St Germain Act…If I remember correcrtly you can probably take over their loan. I believe the act says you can do so and the lender cannot call the loan.

Good Luck,
Bill H

Bill H. Thanks for the information on the Garn St Germain Act. A lot of good information and another option for future deals. I’ve only done 4 deals over the last 15 years but all were no money down. None were assumed, however and this gives me more tools in my belt as I am preparing to ramp up and dive head first into investing again!