Seller financing - Posted by Mike

Posted by Robert(CA) on April 20, 2000 at 14:42:37:

Starting at 5 years old, I began giving my kids (now 6 & 8 yrs.)a weekly allowance of $0.25 per year of age.

If they put their money in the “Save” Piggy Bank (they must save it for at least one year) , I double their money when they take it out.

If they put money in their “Invest” Piggy Bank, which means that they can only get the money when they are grown up (I tell them “That’s when you are 25”), I multiply it by 4x!

Can you predict the outcome? I thought so too, but I was wrong. They have completely blown me away with surprise. They put almost everything in their “Invest” Piggy banks, even pennies they find on the street!

It’s getting to the point that I may have to change the rules. My son put $100 he got from his birthday in the “Invest” Piggy Bank, and I had to send $400 to his investment account.

I opened their investment accounts at a discount brokerage last Xmas. and put the money that they had saved in their “Invest” Piggy Banks, multplied by 4, into the accounts. Now that they are old enough to understand numbers, they are very interested in seeing the monthly statements from their accounts.

After many discussions about investing, real estate, business, companies, shares, partial ownership of businesses, onwership vs. control, market timing, etc., my daughter decided to use 1/3 of her “Invest” money to buy 4 shares of Microsoft on Monday.

And now I just can’t believe it: For the last 2 days, the moment she came home from school she wanted to see the Microsoft stock chart. She is 8 years old, but at this rate I can only wonder when her net worth will surpass mine.

Seller financing - Posted by Mike

Posted by Mike on April 16, 2000 at 06:20:21:

I want to sell a home to my daughter and her husband they are currently renting from me. Their past credit history makes obtaining a normal loan difficult at this time. I was thinking of holding the mortgage using seller fincing but I don’t know the specifics of how to do this. Info in this subject is vague. Most books have a paragragh on the subject.Any help on this Tks

Re: Seller financing - Posted by Kev.

Posted by Kev. on April 17, 2000 at 15:53:57:

Hey, Mike!

Put the property in a land trust, give them at least a 10% beneficial interest in the trust, then give them an undivided interest in the property, have a lease as part of the agreement. They get to deduct all the mortgage interest paid on the property and you get to split the appreciation in the property, above what you sell it to them for (full mrkt. value). Also, you have a deduction for depreciation on the property, still.
What you have done is sold the house to yourself and your daughter/son-in-law, in a way. You now own the house jointly.
If the house is free and clear, refinance and take cash out, they will make whatever your new mothly payment is and you have the use of the cash, tax free.
Check out Bill Gatten and his Pactrust gig.
I don’t work for, or know Bill Gatten. Our program we use is just very much like what he does.
Again, this is NOT a promotion for Bill Gatten.
This type of program is simply an ideal one for your particular situation.

Re: Seller financing - Posted by Craig

Posted by Craig on April 16, 2000 at 17:04:38:

I too am surprised some pushed you to donate your house to your daughter. That happened to someone in my family and did NOT work out. It seems hard to appreciate Free things ! You mentioned daughter could not qualify for loan ‘normally.’ I would suggest checking with one of the Owner Finance Funding groups that work nationwide. They are Private Investors, etc, and qualify a lot of people that had given up hope. A note is created and purchased for cash at closing.

The simplest solution - Posted by Doug Pretorius

Posted by Doug Pretorius on April 16, 2000 at 12:21:10:

Your daughter and her husband are already paying rent, so here’s how you can ‘give’ her the house without spoiling her:

Go to your RE lawyer and have them write up a simple agreement that every payment they make is applied to the purchase. Similiar to a lease/option except you can leave it open for you to benefit from a large upswing in value.

This basicly amounts to you lending them the money to buy at 0% interest.

This way, they still have to work to buy the property. But they don’t have to pay interest to some lender, and you still can benefit from appreciation.

Re: Seller financing - Posted by B.L.Renfrow

Posted by B.L.Renfrow on April 16, 2000 at 10:56:49:

First, I agree with Tim’s post below. After all, the question was about how you can help your daughter and her husband become homeowners, not about charity. And even if you CAN afford to just give them the house, that’s not to say it would be the best solution. Percy, there’s nothing in Mike’s post to suggest he’s trying to take unfair advantage of them; quite the opposite, I think. If you chose to GIVE your child a house, great…but that’s not necessarily the best solution for everybody.

Now that I’m off that soapbox…in order to sell the house to them (I am assuming you own it free and clear) they need to execute a purchase agreement. Then have your attorney draw up a mortgage and note with terms you can both live with. That’s about it. There are issues like title insurance and recording of documents, which the attorney and/or title company should address.

Alternatively, you could consider a land contract, where you hold title until they pay all or an agreed-upon portion of the note.

Of course, I’m sure you have already considered the implications if they can’t/don’t pay, and how you would deal with that, if it should arise.

Brian (NY)

You want to WHAT! - Posted by Percy

Posted by Percy on April 16, 2000 at 08:40:40:

Hey Mike;

Did I read this correctly? You want to sell a home to your daughter! You are charging her rent! You want to hold a note!

Mike back up here a minute, this is you daughter, your own blood!. You want to charge your own daughter! What is the world coming to? I gave my daughter one of my properties! It’s no biggie to give up one property for your blood. My profits are so great with REI that I believe that all of my success has to be paid for. God told me to give my daughter her own house as that fee. I did. I now move on, and I’ll be closing this Thursday on yet another great deal! Give her the house Mike and you will be rewarded greatly!!!


YOU DID WHAT??? - Posted by Laure

Posted by Laure on April 18, 2000 at 20:12:30:

You GAVE Your kid a house? Hmmmm… I make my four teenagers EARN everything they get. Maybe I’m harsh, but life is harsh. I made my son buy my truck from me. I could have just given it to him. I feel they need to learn responsibility, and that comes from paying the piper.

Laure :slight_smile:

Re: You want to WHAT! - Posted by Rob FL

Posted by Rob FL on April 17, 2000 at 11:02:59:

Although I am sure your intentions are good there are a few other things to consider.

  1. If there is any institutional mortgage on the property, any late payments can trash dad’s credit.

  2. Gifts over 10K per year can have hefty gift tax consequences with the IRS.

  3. The easy come easy go ideas described below. Giving the child in essence “welfare.” The Millionaire Next Door, a great book by Thomas Stanley, has an entire chapter on this subject. He calls it “economic outpatient care.” His information basically says that doing things like that are a recipe for financial disaster on the kids.

Be careful… - Posted by CarolFL

Posted by CarolFL on April 16, 2000 at 10:43:12:

All kids are different.
I tried that approach with my daughter, and it was a disaster. She wasn’t ready for it.

Sure, if a child is already acting responsibly, maturely, and moving forward in adulthood in an acceptable way, a gift can be great fun for all.

The comment about “their past credit history” sounds to me like this is not the case, and a gift could be the WORST thing to do for the child.

I had to learn that not all kids are created ‘equal’… and what is right and good for one may be a disaster for another.

I trust Mike’s knowledge of his daughter and her family.

Mike, you would sell it to them like you would anyone else… maybe give them favorable terms, but keep within reasonable bounds so you don’t have IRS trouble.

Any title company or RE atty ought to be able to draw up a contract for deed, or do a lease option with rent credits to help them get enough equity in the property to finance (or refinance) it in a year or two.

But be ready to treat them like you would anyone else.

We had to repo a car, begin eviction proceedings, and go to court to gain custody of our grandchild from one of our kids, so I know whereof I speak!

Percy, bless you and your daughter for your warm and responsible relationship. May you both continue to grow and prosper and may she learn a great deal from you.


Re: You want to WHAT! - Posted by Jaydee

Posted by Jaydee on April 16, 2000 at 10:39:47:

I cannot believe you have suggested to this guy to GIVE his daughter the house ! I realize that this is meant in the very best of spirits , but I can assure you that this daughter and her husband will want daddy to give them a house for the rest of their adult lives . Ever heard the term " easy come easy go " That would undoubtedly apply in this case . Wouldn’t the appropriate be thing to teach these children how to build up their credit , teach them how to buy houses and more importantly teach how to create INCOME !
I am sure the benefits would be far greater , and as a side bonus they may even appreciate what they have worked for .
It is not my intention to ’ shoot ’ your posting down but I think he should finance his daughter and then teach them how to get the house refinanced later once their credit has been re-established .

Re: Mike, you are doing the right thing! - Posted by Tim Jensen

Posted by Tim Jensen on April 16, 2000 at 10:37:07:


Do not give the house away. You need to make your daughter pay her own way! It doesn’t matter whether you have $100 or $1,000,000.

How else, is she going to appreciate the house and understand you have to work for things in life?

Tim Jensen

Re: Mike, you are doing the right thing! - Posted by MStevens

Posted by MStevens on April 16, 2000 at 14:01:25:

I agree. Statistics show this creates unproductive children. I new of a man that needed to pass down his fortunes but new of these statistics and decided to do things different. Every dollar they earned he matched.
They soon became very productive!

Re: Mike, you are doing the right thing! - Posted by MStevens

Posted by MStevens on April 16, 2000 at 13:50:43:

You are absolutely correct, read the statistics. This normally creates failures. If you must give it to them
do something creative. I new of a man that new the statistics of giving away his fortunes to his children,
He decided to make them productive by matching them on every dollar they earned.(they became very productive)

Re: Mike, you are doing the right thing! - Posted by phil fernandez

Posted by phil fernandez on April 16, 2000 at 10:49:52:

I agree with Tim and Jayde,

If daddy gives them a house where will their incentive and initiative come from in the future. No free lunches in this world, you’ve got to work for it.

The best thing Mike can do is owner finance the house to his daughter. Let her make monthly payments on the house until the credit is repaired to the point where she can refinance.