real world RE ? best method to purchase house for MIL

Discussion in 'Economics' started by 151, Apr 20, 2011.

  1. 151


    My mother in law (honestly the best MIL ever, not sure how I got so lucky)

    Wants to move out of her 40 year old 2k sf home on three acres in the suburbs, and buy a 3k sq ft new home on 1/3 acre about a block away.

    The new house will likely cost her 175K (originally sold for 250k) her old house will likely appraise for 175k (only because of the land) but should rent for over 1k per month maybe more certainly not less.

    We are considering paying cash for the new house and renting her "old" house.

    or, getting a heloc against the "old" house to buy the new and renting the old to cover the payments

    Or, getting a traditional loan for the new and renting the old.

    My MIL is 59 and doesnt need money, but a little extra cash she would not mind having to spend on my nieces and nephews. She is frugal but lives well, still works and is not planning to retire for at least five years.

    If there is any other info that would matter please lask.

    Any suggestions? Thanks for any info you guys have.
  2. Can you get a good discount by coming in with cash?

    If not and you have the money, why not get something like a 5/1 ARM and make big extra payments so you pay it off even before you need to re-finance? This way you don't tie up all your cash in the house and have it available for emergencies (such as the rental being empty for a year). You could a nice chunk of it in to something safe like a 2-5 year CD and that would offset a portion of the interest.
    The lowest cost would probably be just a straight out cash purchase, but that also depends on how sure you are that you can keep the rental filled and how prepared you are to deal with any financial emergencies.
    My $0.02