You can get rich from capital appreciation in real estate by buying your parents’ properties through traditional or creative financing that may or may not require a down payment or credit. Whether you’re a first-time homebuyer or a seasoned investor, you can buy any type of property from your parents, from a house you live in with them to an investment property you rent out to tenants. Here are a few reasons why you may find it faster, easier, and more financially lucrative to buy from your parents than from anyone else.
You don’t have to buy an entire property
When you buy from your parents, you can buy whatever percentage you want, like 10%, 50%, or 75%. If you pay less than full price, you’ll have lower mortgage payments and more affordable home buying. No matter what percentage you own, you still get the benefits of homeownership, such as capital appreciation, mortgage interest deductions, property tax deductions, and capital gains tax exclusions.
You can share the responsibility with your parents
When you buy a partial interest in a property, you and your parents share the responsibility for owning it, including any mortgages you each have, property taxes, owed homeowners or homeowners association insurance, and upkeep. Because you have more than one person responsible for a property, you can rely on each other for financial strength in case of hardship.
You can upgrade your status from renter to owner
Are you already living at home rent free or paying rent? If so, why not buy your parents’ house, since you already live there, and get an equity interest in their property? So, you no longer live with your parents, but you live in the house you have with your parents. If your parents own more than one property, you can buy one of their secondary or investment properties and live on your own.
You don’t have to get a loan from a bank
When you buy from your parents, you don’t have to qualify for a loan from a traditional lender like a bank that has income, asset, and credit requirements because your parents can act as a bank and give you seller financing for your purchases.
You can create your own home loan
When your parents bank, you can get favorable loan terms by structuring your own payment schedule with a manageable loan amount, a below-market interest rate, and a payment term of your choosing.
You don’t need a down payment
Unlike getting financing from a bank that has down payment requirements, you can buy from your parents with no down payment.
You can get property tax benefits
Depending on the state you live in, your property taxes may not be reassessed to current values when you buy from your parents or grandparents due to a parent-to-child and grandparent-to-grandchild property tax reassessment exclusion . This is a great benefit when parents and grandparents have owned the property for many years and have property taxes based on the values of their properties at the time they were purchased.
You can receive gifts from your parents
Your parents can give you gifts of cash or stock for your purchases, reduce the principal amounts of any loans you owe them, and allow you to shop at a discount. Anyone can gift a limited amount of money in a given year to any number of people they want without having to report it to the Internal Revenue Service. This is a way your parents can sell you without you having to pay off all the debt you owe them. They can also credit you money at closing escrow for your closing costs by deducting the credit from your sales income.
You can turn your financial supplements into an investment
If you are financially supplementing your parents because they don’t have enough to live on when they retire or for any other reason, you can turn your supplements into an investment by buying your parents’ home and making your mortgage payments to them. As a result, you will have an equity stake and the benefits of home ownership.
You can get benefits if you are a real estate agent buying from your parents
If you are a real estate agent, you can get cash from your parents at the closing of the escrow. If there is enough equity in a property to pay off any existing liens and pay you a fee, you can get a traditional loan to buy an interest in your parents’ property and get a fee for representing yourself as the buyer, or both yourself and your parents as buyer and seller.
You can still get rich when your parents aren’t an option
If your parents are not an option to buy, consider buying from other family members and any other sellers. You can purchase a partial interest in real estate and use seller financing to facilitate your purchases. Also, consider joining forces with siblings, friends, roommates, or other buyers to increase your buying power.
It may be easier to buy from your parents than from strangers
There are plenty of resources in our own families, but many of us overlook this fact because we are trying to achieve financial success for ourselves. Because your parents have worked their whole lives to achieve what they have, one of the smartest things you can do is work with your parents and build on their success.
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