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Hello, posting this for advice from people who inderstand investment property loans.
My Dad wants to sell to me his investment property so he can cash out. We want to make this a no-out-of-pocket transaction for me. AKA he would give me closing costs and 20% equity. If this was a primary residence i would just take a loan for 20% less the sales price and the remainder would be a gift of equity. How can my Dad cash out here without me paying anything? Should he just trnasfer the title to me and i refinance 6 months down the line? Is there a faster way to cash out?
Your father may have some tax implications with the "gift" money. Probably best to speak with a tax expert/accountant to figure out the best way to structure the deal.
...he (and Mom) would give me (cash in the form of tax free gifts -up to about $24,000- to cover) closing costs and 20% equity (based on a fair market value appraisal in order to have an "arms length transaction")...
How can my Dad cash out here without me paying anything?
The other issue for Dad is his depreciation vs capital gain.
Talk to the CPA.
This could get REAL complicated real fast and even nice honest CPAs that deal with "regular Joe" clients go to the conferences where the advantages of "special purpose entities" can be made to sound VERY enticing...
Gonna be MUCH cleaner for dad to just sell the place! Call a property broker and get it listed. Even if you and dad decide it makes more sense for you to buy the place from him having the place listed will help ward off an IRS juju about this being a non-arms length transaction for either of you should you get audited.
Unless you and dad (and great grandmama) have a "special relationship" with a white shoe bank I doubt you are gonna be happy with the kind of rates you are gonna get quoted from "normal" investment property lenders...
My son and his GF bought her father's investment property with a gift of equity for their owner occupied home. He also paid all closing costs from the proceeds.
Fannie only has restrictions on non arms length transactions on new contruction property purchases (if working for builder, must be owner occupied), short sales (can't sell to relative), and cash out refi's (can't cash out prior to 6 months).
Go see your lender, have dad see his accountant. If he can swallow the tax bill, you should be fine.
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