Rental property mortgage questions

[BMDUBS]

I need advice on how to obtain a mortgage on a rental property. I have a condo that I have a mortgage on that is my primary residence currently.

My grandmother is in a home and is selling her condo and we have not had any action on it due to the slower real estate market. So I am considering buying it and having my mom and dad move into it for their retirement years to pay for the mortgage as they have sold their home and are currently renting. Can we cancel the contract with the real estate agent and deal with title transfers and the sale within the family through a lawyer to save the commissions paid to a realtor?

I am assuming that I will need 20% down payment but what other qualifications will I need and what else should I be considering before I get into a mortgage like this provided i can even qualify? How do they qualify you for a rental property mortgage if you currently have one from an income standpoint?

Also I am wondering what impact this will have on my ability to obtain a larger primary mortgage in the future if I want to get out of my condo and into a house or even a more expensive property?

[A790]

Are you buying the house from your grandmother? If so, you will need a 20% down payment on the home.

In the future, when applying for other mortgages, you will need to use the income generated from the rental property as part of your application. This isn't that big of a deal.

We just bought a new place and the lender looked at the income generated from our rental properties as part of our application. In the case where we didn't have a lease for one property, we are able to use a market rental letter to more or less show what we COULD rent the property for.

Ask Todd (tpurcell4) about this as he's my broker and doing a good job for me

EDIT: I am not a mortgage broker/professional, so always seek professional advice

[BMDUBS]

Yes I am buying from her and we have the 20% down. Although there will be virtually no income as I will be renting to my parents. Their costs will just cover the mortgage, taxes and condo fees so the benefit to us is that my grandma can clear her estate in advance and my parents have a place to go after the fact that will end up appreciating in market value.

Will it matter that I am renting to a family member and that the rent will be equal to all costs involved and no revenue will be generated?

[BMDUBS]

Wow, now I am thinking about the tax angle. What kind of additional income or other taxes will I have to pay? Or will I only have to pay in the future when I sell?

[tpurcell4]

Hello and thank you A790

You will need to discuss with your Realtor about cancelling your *listing early if they will let you.

For the mortgage depending on your strength there are some few options you could look into.if you would like to discuss in further detail please PM me.

And yes buying this property will impact your ability to buy some larger personal residence in the future as you will have to debt service the payments.

*edited typo

Cheers

Todd

[gwill]

Of course you can cancel the realtor from being part of that deal. Hes not bringing a buyer into the equation so your not obligated to pay him/her. OverallSounds like a sweet plan for you in helping all of your family and you get a good long term tenant in the property who will take care of it.

Win win situation for everyone.

As for any additional taxes you won't have to deal with that until you sell. The taxes for the rental property will be fairly easy to figure out. Being that it sounds like a long term investment property you could talk to an accountant to have the condo put into a business name instead of your personal name. This way when you do sell you can minimalize the taxes you do pay out.

Also this can be transferred into a business name after the purchase is done.. Doesn't need to be right away.

[tpurcell4]

^^
You sign a listing agreement and contract with a realtor when you list a house for sale. I would check with a realtor or better yet a lawyer just to be sure. You don't want to put yourself in a position where your realtor can demand their commission for selling the house privately while they have the contract to sell your home.

Better safe and verify, because it costs realtors money to list a house on the MLS.

Cheers,

Todd

[zooter]

Why don't you just wait for the listing agreement to expire?

[gwill]

Or cancel the listing agreement because you can at anytime. You don't need an agent to do what your wanting to do. A realtor would have to be super greasy to try and weasel his way into this scenario like he's owed something.

Any costs a realtor incurs in listing a house is on the realtor. They understand this when listing.... It's not like a realtor asks for money when they don't sell a house or a listing expires so I'm not sure how this factors into anything at all.

Simply cancel the house for sale.. It negates any responsibility or obligation you have with the realtor. What you do afterwards is your own business.

[roopi]

Originally posted by gwill
Or cancel the listing agreement because you can at anytime. You don't need an agent to do what your wanting to do. A realtor would have to be super greasy to try and weasel his way into this scenario like he's owed something.

Any costs a realtor incurs in listing a house is on the realtor. They understand this when listing.... It's not like a realtor asks for money when they don't sell a house or a listing expires so I'm not sure how this factors into anything at all.

Simply cancel the house for sale.. It negates any responsibility or obligation you have with the realtor. What you do afterwards is your own business.

Hard you ever read a listing contract with a realtor? Basically everything you've said is the exact opposite of what a basic contract says.

[gwill]

^roopi- I just scanned one of my listing agreements and it's very straight forward. There is actually a line that specifies what expenses must be paid if you choose to cancel the agreement. I suppose a shady realtor could slip some items in there but it would have to be disclosed with the seller before hand. None of mine have ever had anything listed in that area.

There is also a clause on selling a property on your own but there's a time limit. You can cancel the contract and wait 30 days like it says before doing the transaction and your fine.

There are also simple clauses for cancelling... Pretty straight forward overall. Just as I posted above. Listing agreements aren't rocket science. It seems your paying a realtors expenses for listing your properties... and dealing with shady realtors. Not sure why you would do that...

[max_boost]

50% down no problems.

[Xtrema]

Check and read your contract before you cancel it. Both gwill and roopi are right. Cancelling isn't free but could be cheap. If it's not cheap, I am sure you can wait for expiration.

Income tax angle should not be much unless you have a huge down. You only need to pay tax on profit which is rent - mortgage interest - expenses.

But if you are keeping all in the family, why don't you just let your parents buy the place and skip the headache? I just don't get why you need to collect rent from your parents and then pay tax on it.

[gwill]

The only time it's not free to cancel your listing agreement is if you agreed in writing before hand to paying certain expenses that are clearly labelled in the contract you signed.

Simply waiting it out is one option but why would a realtor keep a listing if you won't accept any offers? It also states the agreement can be cancelled if agreed upon by both parties in writing. Once this is done you only have to wait 30 days as per the contract listing to sell the property to whoever you want.

It is all dependant on your listing agreement but when I scanned mine it was very clear what you can and can't do.

[roopi]

Originally posted by gwill
^roopi- I just scanned one of my listing agreements and it's very straight forward. There is actually a line that specifies what expenses must be paid if you choose to cancel the agreement. I suppose a shady realtor could slip some items in there but it would have to be disclosed with the seller before hand. None of mine have ever had anything listed in that area.

There is also a clause on selling a property on your own but there's a time limit. You can cancel the contract and wait 30 days like it says before doing the transaction and your fine.

There are also simple clauses for cancelling... Pretty straight forward overall. Just as I posted above. Listing agreements aren't rocket science. It seems your paying a realtors expenses for listing your properties... and dealing with shady realtors. Not sure why you would do that...

Fair enough. Every contract is different.

To the OP like its been said make sure you read your listing contract so the realtor has no legal ground to come after you for expenses commissions.