My parents are in some dire financial problems. They live in a building that is also used as rental property. Currently, they are at risk of foreclosure. They cannot keep up with the mortgage payments any longer. In order to not lose the building, I plan on taking out a mortgage to "buy" the building and take over ownership of it. The current mortgage on the building is roughly 40% of the value of the property (and that is being conservative). Regarding this situation, I need to figure out the best way to go about this. I know it is not always the best thing to take over debt like this, but after some hard thinking and a lot of conversations with others, this is what I am going to do. I understand that there are risks involved in this and that I possibly taking on a huge burden...but I've decided it is worth it. I live in a different state than my parents. If I took over ownership of the property, I could not declare it as my primary residence (I do not have a mortgage currently). I'm assuming it would be categorized as rental property even though my parents would still occupy and maintain the building. My idea is to: Take out a mortgage and buy the building from them putting the title into my name. They would be left with no debt and I would own the building. I would then sell it as quickly as possible and use the proceeds to buy them a new home. (I know that I would suffer a large loss of the profits due to capital gains) However, is there a better way to go about this? Can I have my parents sign over the building to me and I could assume the debt? I would refinance it with my credit and get a better rate and own the building. Right now, their mortgage is at 14.99% and it pays no principal (only interest) each month. Currently it produces rental income of around $700/month and I would need a mortgage of around $90,000 to pay it off. As much as it would be better to keep it in my parents' name and sell it as their primary residence and buy a new home with it, I don't know if that is something we can do because they do not handle their finances well. Can anyone give me some ideas on this situation? Even criticism will be appreciated since I think hearing the devil's advocate is helpful in most situations. I will be constantly monitoring this thread and I'll try to provide any other details to clairify if the situation is unclear or I left out too many details.
Are your parents elderly (over 65?) Have they thought about obtaining a "reverse mortgage" Where the bank would give them money every month? It sounds like you do not want the property, that you would sell it anyway. This way they can get out of debt, have a place to live, and there are no capital gains losses to you
My parents are not yet "elderly." I actually wouldn't mind just holding onto the property since I think it would be a good investment, but I plan on buying my own home in a few years so I don't want to be paying on this mortgage when I buy my own home. My parents don't have a strong hold on this place; they just need to move on and live in a house, instead of trying to maintain a building since they don't have the best financial judgment.
