Holding Title? - Posted by Diane, CA

Posted by James on July 27, 2007 at 16:27:00:

Have your mother quit claim it to her land trust. You buy the land trust and supply the documents at closing when you refinance showing you own it.

Ok, simpler answer. Just take title in whoever’s name will be refinancing the property. No need in putting you both on it (for legal purposes).

Holding Title? - Posted by Diane, CA

Posted by Diane, CA on July 27, 2007 at 14:55:45:

my husband and I will be purchasing a house from my mother to be used as a
rental. we plan to refi within one year. in what entity should we take title?

thanks guyz!

Re: Holding Title? - Posted by Don (VA)

Posted by Don (VA) on July 29, 2007 at 15:02:35:

A couple of considerations:

Check with a CPA, especially regarding your mother’s sale. What are the tax implications for her? Can she shelter that gain? So, some of what you want to do, and the way you do it, will probably be affected by her situation. (For instance, and I’m not an accountant, much less a CPA, maybe installment payments. Maybe the use of a land trust.)

Second consideration: Check with the CPA about when to refi. For example, it might make more sense for your mother to refinance while the property’s still in her name and pull cash out that way. You’ll have a more difficult time refinancing a newly-bought (unseasoned) property being used as a rental. And if you buy it from her at fair market value, or close to it, there won’t be enough equity to do a refi. On the other hand, if you buy it from your mother at substantially below fair market value, the IRS may impute profit, even though she never actually saw it. A very messy situation. Check with a CPA.

Also, if you put the property into a land trust (which can be a good move under many situations), it’s difficult or impossible to refinance. You’d have to bring the property out of the trust, refinance, and put it back in. Yes, you can do it. But if there’s another way to pull cash out, you might want to consider those options first.

Oh, and did I mention checking with a competent, real estate-savvy CPA?

Good luck.