You can get rich from the equity appreciation of real estate by buying
real estate from your parents using traditional or creative financing that
may or may not require a down payment or credit. Whether you are
a first-time home buyer or an experienced real estate investor, you can
buy any type of real estate from your parents from a home you live in with
them to an investment property you rent out to tenants. In order
to get rich from the equity appreciation of real estate, you must first
buy real estate, and the following lists some reasons why you may find
it faster, easier and financially more lucrative to buy real estate from
your parents than anyone else.
You Don't Have to Buy an Entire Property
When you buy from your parents, you can purchase any percentage you want,
like 10%, 50% or 75%. If you pay less-than-full price for real estate,
you will have lower mortgage payments, and buying a house is more affordable.
Regardless of what percentage you own, you still get the benefits of homeownership
such as equity appreciation, mortgage interest deductions, property tax
deductions and capital gains tax exclusions.
You Don't Have to Get a Loan from a Bank
When you buy real estate from your parents, you don't have to qualify for
a loan from a traditional lender such as a bank which has income, asset
and credit requirements because your parents can act as a bank and give
you seller financing for your purchases.
You Can Create Your Own Home Loan
When your parents act as a bank, you can get favorable loan terms by structuring
your own payment schedule with a manageable loan amount, lower-than-market
interest rate and repayment term of your choice.
You Don't Need a Down Payment
Unlike getting financing from a bank which has down payment requirements,
you can buy real estate from your parents with no money down.
You Can Share the Responsibility with Your Parents
When you buy a partial interest in real estate from your parents, you and
your parents share the responsibility of owning that real estate including
the mortgages you each carry, the property taxes, homeowners insurance
or homeowners association dues, and maintenance. Because you have more
than one person responsible for a property, you can rely on each other
for financial strength in the event of hardship.
You May Get Property Tax Benefits
Depending on the state you live in, your property taxes may not be reassessed
at current values when you buy real estate from your parents or grandparents
because of a parent-child and grandparent to grandchild property tax reassessment
exclusion. This is a huge benefit when parents and grandparents have owned
their real estate for many years and have property taxes based on the values
of their properties at the time they purchased them.
You Can Get Gifts from Your Parents
Your parents can give you cash or equity gifts toward your purchases, reduce
the principal amounts of any loans you owe them and allow you to buy at
a discount. Anyone can gift a limited amount of money in any given year
to any number of people they wish without having to report it to the Internal
Revenue Service. This is a way your parents can sell real estate to you
without you having to repay the entire debt you owe them. They can also
credit you money at the close of escrow toward your closing costs by deducting
the credit from their sales proceeds.
You Can Elevate Your Status from Renter to Owner
Are you already living at home rent-free or paying rent? Is so, why not
buy into your parents' house, since you already live there, and get an
equity stake in their property? Then, you are no longer living with your
parents but living in your house that you own with your parents. If your
parents have more than one property, you can buy into one of their secondary
or investment properties and live on your own.
You Can Turn Your Financial Supplements into an Investment
If you are supplementing your parents financially because they don't have
enough to live on in their retirement or for any other reason, you can
turn your supplements into an investment by buying real estate from your
parents and making mortgage payments to them. As a result, you will have
an equity stake in their property and the benefits of homeownership.
You Can Get Benefits if You are a Real Estate Agent Buying from Your Parents
If you are a real estate agent, you can get cash from your parents at the
close of escrow. If there is enough equity in a property to pay off any
existing liens and pay you a real estate commission, you can get a traditional
loan to buy an interest in your parents property and get a commission for
representing yourself as the buyer, or both you and your parents as the
buyer and sellers.
You Can Still Get Rich When Your Parents are Not an Option
If your parents are not an option to buy real estate from, consider buying
from other family members or non-family members as well as purchasing a
partial interest in real estate and using seller-financing to facilitate
your purchases. Also, think about joining forces with siblings, friends,
roommates or other buyers to increase your buying power.
It May Be Easier to Buy Real Estate from Your Parents than Strangers
There is an abundance of resources right in our own families but many of
us overlook this fact because we are trying to achieve financial success
by ourselves. Because your parents have worked their whole lives to achieve
the real estate that they have, one of the smartest things that you can
do is build upon your parents' success
.
You Don't Have to Buy from Both Parents
For presentation purposes, most of the book assumes that you alone are
buying real estate from both of your parents. However, the material is
applicable to any deal in which you act alone, with one or more of your
siblings or any other buyers to buy real estate from one or both of your
parents or any other sellers.
Anyone Can Use This Book
The content of the book is geared toward transactions between children
and their parents because parents are more likely than anyone else to agree
to partial-purchase and seller-financed transactions with their children,
and they are more likely than others to give their children financial gifts.
However, the concepts and strategies can be applied to any transaction.
This is Truly a How-To Book
This book will show you step-by-step how to put together these types of
transactions complete with amortization schedules, legal documents and
examples. If you need further assistance, there is a chapter devoted to
a discussion of professional advisors who can help you.
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