OfflineI am sure this has been brought up before, but I am just being honest when I say I do not have any time to be searching. Our agent said we must make an offer tonight, and I have to go back to work in less than hour. Situation is this: Me, my mother,and husband are trying to make an offer on an investment property for a fix and flip. Neither of us has enough money for the cash offer to the bank (REO property) but my grandmother does. She has offered to fund the purchase of the property. However due to legal reasons, she cannot purchase it under her name. Therefore the money must be gifted to one of all of us. A friend that works with REO properties at a local bank told us that you cannot be gifted such a large sum of money without repercussions for the gift-giver. Is this true? What goes along with gifting large sums of money? Could we do a quitclaim deed to get it off her name right away if it must be done under her name?
The other problem is the same person told us we have to have proof of funds to rehab the property as well. My mother has enough money for this part BUT she has not kept money in the bank for years and years. It would be cash that she just has. Since it is not traceable, would the bank not consider our funds for the rehab? Other option would be taking out a loan for the rehab but that is silly when she has the actual cash. What should we do?
The last factor is who is actually purchasing the property. This would be the first property both me and my husband purchase if it goes under our names. I assume that means when we want to purchase our first home to live in(not investment property) we will no longer be eligible for the first time home owners program. Is there a way to purchase the property under an LLC in order not to lose our status? If only one of us puts down their name, let's say my husband, does that mean I could still buy our first non-investment property under my name only and not lose our status?
What are our options here? This is a very last-minute opportunity and we don't want to blow it. Any help would be so appreciated. Thanks, in advance and I apologize for the length and my lack of knowledge!
-Stephanie
Open an LLC under whoever names you decide. Make the offer under the LLC name.(you open the LLC on line in a few minutes) Make the offer with $1,000 deposit (buy a money order or cashier's check and give to agent with contract) write on contract you will put down $1,000 and the rest of deposit (if 10% is required)within 3 business days of the offer being approved. That will give you till next week.
Then, call a certain company (pm me for that)and apply for verification of funds. Give this verification of funds to your agent so your deal is
secured.
Basically what you're doing is getting the money to buy the REO and close. Tell this company you will choose the title company.
Your grandmother will be able to gift each of you money if under $5,000 with no questions asked to fix the house.
Make sure that you're making enough of a profit, and to pay the fee for the money borrowed and to fix it.
Once you have it under your name, (mom, hub, and yours)fix it and flip it within the shortest time possible. This company will loan you the money for up to 40 days, the more days it takes, the higher the fee to borrow it.
Remember too that some closing costs can be paid with a credit card.
Don't be afraid to spend a little money to make more. Forget about the first time buyer program, you can make a lot more in this business. Just use the
the system.
Take into account too, how much you would loose for asking for a couple of hours permission from work to think this through carefully.
I hope this helps, maybe someone can offer better advise.
Julie
Hi
I agree with Julie>
Open an LLC, put your granda as a member, and make she put that money onto the llc as capital or loan.
Ernesto.
If she has the funds deposited in a bank, use her funds as collateral for a personal loan, or have her deposit the funds in escrow and make her the beneficiary of the deed of trust.
Hi, Stephanie~
People can "gift" relatives up to $10K [each] per year with out any penalties or drawbacks.
Although, I would strongly suggest forming an LLC or a partnership (PLLC). Each family member can become an officer within your LLC. You will be protected when you buy properties this way and everyone will be part of the business.
I can refer you (PM me) to a seasoned real estate attorney/investor you can confer/consult with, if you'd like, prior to purchasing any property.
Secondly, you can look into hard money lenders or private lenders so as to not tie up your grandmother's cash.
I have learned that as investors, tying up our only funds is not always best. You could "borrow" a smaller amount from Grandma to bring some 'skin' to the table. Or you could even write up a personal loan from her as well. People do it every day. Be sure to write up a contract with her as she will be your 'private lender.' Add interest on her end. Treat it like a legal business deal. Repay her in a timely fashion.
Also, you must know your EXIT strategy BEFORE you sign any contract to purchase. So do thoughtfully have your plan ahead of time. [Having a Plan B back up is recommended in addition]. Do you have buyer(s) lined up? Remodel contractor? Is this a fix/flip resale? Buy & long term hold? Temporary hold? Personal residence? Will Grandma be getting a great ROI with profit in the deal? If she puts up the money, who will oversee the rehab, maintenance, or reselling the property?
Time vs. Money Split. (Grandma has the $$$/You have the time).
You could structure a deal 50/50, 60/40, 70/30.
Creative Financing!...work out the details; create & define your exit strategy.
Think SMART.
Happy Prospering! ~Kat, Liberty Residential Investment Acquisitions
• "To every thing there is a season, & a time to every purpose..." ~Ecclesiastes 3:1-8
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Stephanie, there are many options available but you have to be very careful how you structure the deal to NOT jeopardize the parties involved. You don't want the IRS or other government offices wondering why you have so much money home or anywhere without proof where the money came from and if taxes were ever paid. I would be very careful and take your time even call out of work tonight to come up with the structure for your business. Believe me, if you make profit at the end people will ask questions and jealous individuals might even make phones calls. Keep it quiet and really think about the best way to do this!
Joseph