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I currently rent a house and would like to own it but am unable to get a mortgage, have zero credit and no money to put down. I think I have a solution...
I currently rent a house for $1700/month. My landlord is an elderly lady who owns and lives in a second house near by. The house is old and will need some major repairs over the next 10 years (windows, siding, kitchen). My landlord seems overwhelmed every time something needs repairing. She trusts me as I always pay my rent on time and we get on well.
I would like to propose to her that she gives the deed of the house over to me. In return I would then owe her the value of the house to be paid in monthly installments of $1000/month with the option to pay back sooner if I wish. The house would then be mine and off her hands and she will receive a steady monthly payment without any risk of unexpected expenses. I could then do as I wish with the house and the debt owed to her would be completely unrelated. Unfortunately as she is very old, she will not likely see all of the loan repaid in her lifetime but should she pass, the loan could then transfer to her children so it's an inheritance that she can also see some benefits from.
I have a lawyer in the family and am really considering drafting a proposition and contract and seeing what she thinks. This would save my wife and I $700 per month and give us some growing equity to our name that we can live in for the foreseeable future and potentially rent out ourselves should we move one day.
There are many pros I can list for both her and myself but I was wondering if this sounds like a good/feasible idea.
Any help, suggestions or feedback would be greatly appreciated. This is a new idea and I want to get some other opinions before I take it any further but at the moment I can't see a reason not to try it and see what my landlord thinks.
Your proposal is wildly unrealistic, to say the least.
She's not going to sign over the deed to you.
And I think you need to read the Dodd-Frank Act very, very carefully if you pursue this course, as you will be in violation of Federal law. (Not to mention open to criminal charges of elder financial abuse.)
What would be her motivation for signing the house over to you for a monthly payment that is $700 less than what she is getting for rent now? If the repairs were more than she could handle or more than she wanted to deal with then it would probably behoove her to simply sell the house to someone who can pay her the full value of the house all at once now instead of small installments for years to come? Maybe should would consider a lease with an option to buy which is far less risky for her if you decide to stop making payments.
Easy fellas, I am a web/graphic designer and don't have any experience with real estate so am seeking guidance. If it is an impossible proposition then that's fair enough, I'll stick to renting until my credit grows enough for a bank mortgage. I just have a feeling that my landlord would be interested in getting rid of the property soon and seems very stressed every time she has to drop money into repairs and maintenance, as I said she is very elderly and the house seems a burden.
She would not just be handing over the deed. She technically would be mortgaging the house to me privately. Is this not a common practice known as owner financing?
Obviously I wouldn't do anything if it was illegal. The "lawyer in the family" would basically just help put together a contract for the loan.
As I said, if something like this is not possible, has not happened in the past then no worries, I shall not pursue it.
I currently rent a house and would like to own it but am unable to get a mortgage, have zero credit and no money to put down. I think I have a solution...
I currently rent a house for $1700/month. My landlord is an elderly lady who owns and lives in a second house near by. The house is old and will need some major repairs over the next 10 years (windows, siding, kitchen). My landlord seems overwhelmed every time something needs repairing. She trusts me as I always pay my rent on time and we get on well.
I would like to propose to her that she gives the deed of the house over to me. In return I would then owe her the value of the house to be paid in monthly installments of $1000/month with the option to pay back sooner if I wish. The house would then be mine and off her hands and she will receive a steady monthly payment without any risk of unexpected expenses. I could then do as I wish with the house and the debt owed to her would be completely unrelated. Unfortunately as she is very old, she will not likely see all of the loan repaid in her lifetime but should she pass, the loan could then transfer to her children so it's an inheritance that she can also see some benefits from.
I have a lawyer in the family and am really considering drafting a proposition and contract and seeing what she thinks. This would save my wife and I $700 per month and give us some growing equity to our name that we can live in for the foreseeable future and potentially rent out ourselves should we move one day.
There are many pros I can list for both her and myself but I was wondering if this sounds like a good/feasible idea.
Any help, suggestions or feedback would be greatly appreciated. This is a new idea and I want to get some other opinions before I take it any further but at the moment I can't see a reason not to try it and see what my landlord thinks.
Thanks!
Tom
If you presented your idea to me or any part of my family you would be evicted as quickly as legally possible because it is obvious you do not have good intentions.
The moment she signs the deed to you, the home belongs to you whether you pay for it or not and I believe you already know this, you are just hoping to take advantage of an elderly woman.
You have given yourself away with your math above, if you currently pay $1700.00 but with this contract you would be paying $1000.00 you are not saving $1700.00.....
What you described is not "owner financing". If you want owner financing, tell you attorney person that's what you want. You will have to pay the go rate on interest rates and should offer something down, even if it's just 1%. She cannot just sign the deed over to you. It's a process, and it probably won't be $1000 a month if you're already paying $1700 a month in rent.
What would be her motivation for signing the house over to you for a monthly payment that is $700 less than what she is getting for rent now? If the repairs were more than she could handle or more than she wanted to deal with then it would probably behoove her to simply sell the house to someone who can pay her the full value of the house all at once now instead of small installments for years to come? Maybe should would consider a lease with an option to buy which is far less risky for her if you decide to stop making payments.
Hey, good point, off the top of my head here is what I see could be her motivation...
She is elderly and owns another house locally where she lives so has low living costs.
The house will need major repairs within the next 5 years or so (Windows, siding, kitchen). All of which I don't think she will likely be able to afford.
She would not need to worry about finding tenants every year and paying agent fees and risk a few months every year or two with it sitting empty.
She would have a stable guaranteed income of $1000/mo without the risk of having any unexpected payments from this house as well as taxes etc.
She knows us well as we are great tenants and knows we can be trusted, she lived in this house for a long time (30+ years) and may even find satisfaction knowing that it will be looked after as my wife and I start our family here.
I think the house would be difficult to sell as it looks like it hasn't had much work done to it in 30 years and as I said has some major upcoming updates needed.
The $1000 per month is also just a number I made up, it could be more. It basically means she gets a little less money but it is guaranteed over a private contract that she will be paid for years to come until the value of the house is paid off. Otherwise we will likely leave here in a year or so and she would have to keep finding new tenants and struggling to manage the house by herself.
OP,
The rule of thumb in these situations is that you pay MORE per month for the ownership opportunity.
I hope that if you approach her with this deal, she sells the house immediately and the new owners evict you.
Does she own the house free and clear or does she have a mortgage on it? Owner financing is pretty rare, because the house (typically) has to be paid off with no mortgage. If she is elderly, maybe she doesn't have one, but you don't know that.
Secondly, you may not be saving $700/month. How much are the taxes and insurance? You would be responsible for those, and those could be more than $700/month. Not to mention any maintenance, and the HOA dues and any utilities you aren't currently paying, which even on a house that the tenant pays "all the utilities" usually doesn't include things like irrigation tax. So there could be a lot of costs you aren't considering.
Also, most owner financing has a balloon payment after a few years. So you pay $x amount for y years, and then have to get bank financing and pay off the balance in full after say 5 years. If you don't, then she could foreclose on you. Also, owner financing usually comes with a substantially higher interest rate than the open market, so $1000 might not even cover the interest, depending on how high the purchase price is, so you could be a 50 year loan or something at $1000/month. And even on owner financing, the buyer should always be required to have a sizable down payment.
Beyond all that, I agree with others here. If I received a proposal like yours from a tenant, I'd be highly suspicious of this person for the rest of their tenancy, and I would not renew their lease. The way you have described this screams SCAM!, whether or not that is your intention. I agree with fluffy that it sounds like you are trying to take advantage of an elderly woman who probably doesn't have anyone looking out for her interests.
If the lady really can't afford to make repairs, then she should sell the house in a standard sale. If she is upside down and can't afford to sell, then she couldn't do owner financing either. Your proposal carries a very high risk to her with VERY little benefit.
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