Tuesday, August 28, 2012

Newest Trend...Becoming Landlords to Family Members

I am not sure this is the newest trend in real estate, perhaps it is an old trend resurfacing in a big way, but purchasing as an investor and renting back to a family member is BIG!  At least it has been a significant part of my business this year.  The interest rates are low; parents/grandparents might be sitting on a lot of equity in their present homes that is available at all time low rates as well.  Rents are high and rising along with the demand for rental property.  Knowing  family member who for many different reasons will be renting rather than purchasing a home in the present market makes for a perfect combination of landlord and tenant.

  In some cases, parents are paying for housing for a college student or new graduate.  Why not turn that into an investment rather than allowing someone else to collect the rent?  It may also be more cost effective to purchase.  Buying may cost less than renting and the investment write-off be a tax advantage.

  Of course, there will be things to negotiate not only with the seller but with the now
tenant/relative/child/sibling.  The mortgage rate for investors are a bit higher than that of the owner occupied and investor owned property might also have a higher real estate tax rate. The mortgage process for the investor is tedious and paperwork exasperating. In the end, there are many different ways to use resources, to invest and to be there for a family member, but providing one of the most necessary elements, housing is tangible and generous. I feel I am seeing a tread, each time I have witnessed it in my personal business it is a gesture of love and caring and it is deeply appreciated.  Something to think about....

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