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I'm wanting to buy rental property from my parents so that they may retire. I know the best way would be for them to finance them to me and circumvent the banking system all together. But due to family reasons they don't want to do that.
The question is They have 12 rental properties which provide approximately $6,800 a month income and I have talked to banks which tell me that I can't finance them without having a mortgage on each individual property and paying anywhere from 10%-30% down. The properties are worth $775,000 (appraisal value) and they wish to let me have them for $689,000. That means even a small down payment will be about $100,000 or more (money that I don't have), and it would also mean that my payments would be more than the income coming from the properties.
I also heard that there may be a way to borrow the money using the properties as collateral and then refinance then under a mortgage company, whereas no money down.
Please help with my dilemma
What a plan. You want to buy them out so they can retire, but they won't finance you and want to sell to you at a "discount" that guarantees you will lose money.
And, evidently, you want to do it.
So, ask yourself a couple of questions. First, do YOU want to be a landlord? Second, do your parents want to retire, or is this your idea?
If you want to have an investment property, find a deal that makes sense and do it.
The numbers here don't suggest to me that your payments would be more than your income; you have a Gross Rent Multiplier of 8.44. This is high but not obscene. You didn't provide enough information to really figure it out, but this number says zero to slightly negative cash flow, it doesn't say "payment greater than income".
If your parents want to retire, tell them they can do a tax free exchange to bare land. They can then rent the land to a farmer, or sell it off piecemeal (thus mitigating the capital gains hit they'll have if they sell it all to you). If they don't want to retire, but you want to be a landlord, go find a better deal.
About the Author: Jim Locker is a technical guy who has done a lot of real estate investing and landlording. The experiences he writes about and advice he gives are either first hand, or in answer to specific questions posed by others. He is commonly known as jiml8 around the internet.
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