taking on a mortgage to buy a family member's home
I've got this real estate "investment" idea, but since I know nothing about real estate I thought I would ask for advice here.
It appears to me that mortgage debt is unreasonably cheap right now, and that any investment in a home likely has limited downside currently. This alone makes me hungry to get a mortgage and buy real estate as investment.
However, I know that if I am not looking to live in my property (I am not), then this typically would not make any sense as renting the property out would not likely make enough money to cover both payments to the bank and a property management company (I'm a first year analyst and maintaining any property is obviously out of the question).
That being said, my family has presented me with an opportunity to buy my sibling a ~100k dollar condo. I would have to put ~20k down and the rate would be roughly 4.5%. My sibling would live in the property, pay me rent, and maintain the property herself (thus cutting out the need for a management company). Further, they would pay me through a tax free gift, which considering the retarded tax rate in NYC, makes it seem even more attractive.
I really want to pull the trigger on this because of the current attractiveness of mortgage debt, real estate investments, and arbitrage created by doing this with a family member, but I am worried there are considerations that I am missing / ignoring. Anyone more enlightened than I have any thoughts?
Never ever rent / lend money to someone you wouldnt be willing to evict / take to court.
doing business with family is stupid.
Agreed with the above. Also, if you don't know much about something you are speculating not investing.. $100k condo around NYC? I guess with 20% down you may not need PMI but you should check. Don't forget to include taxes and insurance in your cash flow an analysis. Will they be paying a market rent?
Kind of interesting. Since you will have no rental revenue (they are paying you as a gift) then you will have net rental real estate losses. Passive investment losses can offset passive capital gains. So that's a nice little benefit--you won't pay any taxes on capital gains up to the amount you can write off in losses.
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