I want to buy a condo for my son to rent. Should it be in both our names?
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I want to buy a condo for my son to rent. Should it be in both our names?
I have made an offer on a condo for 57,900 in an up and coming area. The
condo will need about 10,000 in upgrades/renovations. My father died last year
and left me an IRA. I’m trying to decide if I should pay cash using some money
from the IRA or mortgage this property. I want my son to live there and he will
pay rent to me to put the money back or pay the mortgage. Should the property
be in both our names? Should I pay cash or mortgage? He makes less than 20k a
year and probably wouldn’t qualify for the mortgage. Do we put the mortgage in
both our names? What are the tax implications?
Asked on May 30, 2016 under Real Estate Law, North Carolina
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 7 years ago | Contributor
If it is in both your names, if you pass away, it becomes his automatically. And if he stops paying rent and causes you financial distress so that you have to sell, he will be entitled to a share of the equity, because he will be part or joint owner. And if he is sued for any reason (e.g. bad debt, car accident), the plaintiff (if the plaintiff wins the suit) could put a lien on the property. And furthermore, if he stops paying rent, he can still live there, as an owner; and you would need his consent to any sale of the property--again, because he will be an owner Based on the above factors, you need to decide if is right or wrong for you to purchase in both your names, or only your own.
As to mortgage or cash: look at what mortgage rates you could get, then decide if, based on the rate you'll be paying, if you have a better use for the cash or not. If not, you may wish to use pay cash and save the interest.
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