HOW CAN I HELP MY PARENTS!??!?!?!?! HELP

[vision84]

Hello,

I am 20 years old and when I get out of college and find a job I am going to inherit my parent's house.  So basically, the house is already mine.

My parents were born in a different country and were brought up with no education (my mother can't even read) so they have faith in me and are willing to let me invest the equity in our house in whatever i choose.  I feel that real estate is my calling and i have always been interested in it.  

How would I go about investing the equity if it's under their names?  

Do they have to be there for every transaction and have me translate what buyers, lenders, insurance etc, want?  

How can i get power of attorney and pull out loans under their names with their approvals?  

Do they have to change the title of our property so that it is in my name so i can do as i please?  

My parents want me to help them invest because they know that it's the right thing to do.  We have over $150000 in home equity and i know that it can be used in a better fashion; rather than just sitting around.  

My father has always pondered about small businesses but he knows that real estate is the best way to go (he wants apartment buildings in the future).

How can i go about doing this?  

Essentially, I will be the intermedary to help my parents with whatever comes our way.  I feel as though i have gained the knowledge from talking to other real estate investors and know it's time to experience the real thing.  My parents want it too.  They just don't have the language and understanding of how to do these kinds of brilliant things.  

It's time to take action!

[L.A.Investor]

Hello Vision 84,

It sounds like you are in a great situation, one with lots of equity and the trust of your family to invest. You have a few choices. The easiest choice may be to pull the equity out in cash (under your parents name, whichever has the original loan) and begin investing. They can just deposit it into your account, and then you can begin.

Another option, if you are concerned about keeping them in the loop, is to create a legal entity. You should be doing this anyway, for liability reasons. Form an S-corp, or LLC to hold the properties. You can include both of your parents name in the LLC yet retain the majority and decision making position.

I am not an attorney. It is vital that you make an appointment with a real estate attorney, preferably one that invests him or herself, and get the legal help that you need. The attorney can advise you on which legal entity is more appropriate for the types of investing that you will be involved with, and also you should acquire copies of all the REI forms that you will need. Lease to own, rentals, purchase offers, etc.

Search through this forum and research all that you can. There is some great situations that you can learn from here.

Take care,

Andy Gibbs

[vision84]

Hi Andy,

Thank you for the much needed advice to get started.  I am looking to purchase single family "fixer-uppers" and do a lot of the work myself or with buddies of mine.  Basically, I want to get into the business of flipping homes.

Another novice question, how do I go about taking the equity out of the home?  Will this make us owe more on original mortgage of our house?  Or do I need to go and finance a separate HELOC and make sure I pay it back before incurring too much interest.  How do the steps of taking the equity out of the house work?  I know that there are several ways but what are some?  I really need guidance, thank you.

I already have a list of all the contacts that I need in order to get into this business but without any money readily available, who would want to talk to me.  The first thing i need to do is get the money established then i'll be able to walk the walk and not waste people's time because they'll know i'm serious.   MONEY TALKS!

Do you, or anyone out there, know anything about hard-money lenders?  I heard they are a great way to get started.  Is this true?

Thank you to all who reply

[L.A.Investor]

Good morning,

You can find the answers to your questions (and much, much, more) by researching this forum. Spend an hour or more a day reading through the posts here. There are also some other REI groups that can be helpful. Locate your local group.

You should also speak to a lender, you can check the investor services on this website. Speak with at least 4 or 5 lenders or brokers. A decent one will explain what is best for your investment style. Using a HELCOC instead of a home equity loan may be better if you are using the money for short term rehabs. If you will buy and hold an equity loan may be the best choice. Speak with someone who specializes in investments.

Please remember to be patient and learn everything possible before you begin to deal. Many people will share with you their mistakes (read though the older posts on this site) so you do not have to make the same ones. Learn what a Hard Money Lender can do for you, and understand that you may not need to use one if you have other ways of getting financing. HML's only lend 65%-70% of ARV, and the interest is extremely high. Usually they are only used when no other funds are available. Strictly for short term rehabs.

Nobody is going to do your work for you. It is vital that you research everything possible. By simply searching the internet (google, yahoo, etc.) you can locate just about anything. And yes, if you take out the equity you will owe more. Many, many investors on this site and others began by using their own equity to leverage other properties. I am fortunate myself to live near Los Angeles (Valencia) and I have a ton of equity to begin with.

Take care,

Andy Gibbs

[vision84]

Thank you again Andy for your helping me.  Deeply appreciated

[aak5454]

There are a couple of key issues to deal.

First off, if your parents were to draw out the equity for investment and give you the money, there is possible tax consequences.  Furthermore, if you show up a lender office with money in the bank, you will need to show some source of income as well as money for a downpayment.  Assuming your parents have a steady income and hold the equity, it would be best to work with them.  Using an LLC is one option, but not totally necessary.

Second, you mention to do the work yourself.  How much experience do you have in home repair activities?  You don't have to be a pro, but need to have some skilled and experience.  Also, its eary to walk thru a house and rattle off a list of things that needs to be done, but even a "simple" rehab can take several hundred hours.  Sure that do not sound like much, but if you a buddy work 10hrs a day every Sat AND Sunday, it could still take 6-12 weekends without a break.  Plus you have time during the week for planning gather materials, etc.  I have done several renabs including a 2500 sq ft house that took 1400 hrs of labor working nights and weekends (plus many hundreds more in planning).  Sure, I made some serious money on the deal, but it takes some serious commitment and hard work (i have a regular day job, M-F).

I would figure out what it takes to buy a house in your area that is run down.  Then talk with a lender, have your parents get a an equity loan for a downpayment plus some reasonable amt of cash for the rehab and then start looking.  If you have not already done so, you need to spend many weeks or months studying the specific area you want to buy.  Don't buy the first thing you find that looks like a deal becuase chances are it isn't.  Also, if you don't have a lot of experience in home repair, you need to have someone house hunt with you who can spot major problems.  Nothing will kill a rehab deal quicker than figuring out oafter you bought that there is a serious issue that you had not planned on.  Of course, get the house inspected prior to closing the deal, but you need to be able to spot problems even prior to that step.

[aak5454]

One more thing is you should make sure your parents have the right risk tolerance.  Real estate is NOT a "everything you touch, turns to gold situation".  Be sure to discuss the fact that you might encounter higher repair cost or longer holding times than you anticipate.  You might end up after a lot of work just breaking even on a deal.

Also, be aware that the guber-mint will get their fair share.  If you sell in less than one year, you might pay 30-40% of your profits in taxes depending on e where you live and you and your parents income situation.

I'm not try to scare you, but rather highlight that there are a lot of things to think about before you start signing loan papers.  Investing in real estate does not equate to a license to print money (despite the belief of many folks).

[vision84]

oh trust me, my parents and I are fully aware of all the risks involved

i'm definately looking for joint-ventures with successful experienced investors.  i have already found a few that need assistance with funding and from there, i'll take the contracts to my lawyer.  what a great way to get started.  

thank you for your input aak5454