The next issue will be that financing for an investment home purchase is not as "friendly" as financing for owner occupied homes. She needs to be prepared to make a higher down payment and pay a higher interest rate for any loan she may need for the purchase.
During the escrow period of the purchase, your daughter would be very well advised to invest in a home inspection and a pest inspection. As much as possible, it would make sense for her to negotiate for the seller of the property to do as many repairs as possible. Once she becomes a landlord, making property repairs will be her responsibility and expense.
She will need to purchase an insurance policy as the owner of the property, including appropriate liability insurance. You, as the tenant, should consider purchasing a renter's policy to cover your possessions.
It is highly advised, particularly as you will be paying rent, that you both approach this professionally and in writing. Write up a rental agreement, including an addendum if necessary of who pays what expense - for example, who pays for water, sewer, electricity, gas, HOA dues, etc. Be sure to include a security deposit amount as typical for renters. This formality will protect and ensure her legal ability to deduct property expenses and depreciation on her tax returns, and will help protect you both from any misunderstandings or disagreements that may arise.
You would both be well advised to discuss and put in writing what will happen should you not be able to pay the rent, or as much rent as you will start out paying, or if she should happen to need to sell the house. Discussing these unpleasant issues in advance of need can be extremely helpful if either of these issues arise and you are both under stress.
It is highly advised that your daughter understand that even though she is related to you, she is liable in the State of California for all the expectations and requirements as a landlord in landlord-tenant law. There are specific habitability, rental increase, and notification requirements that she must follow, and that protect you, the tenant.
I applaud your daughter and am pleased she cares for you. My mom is renting from me, so I do know all about this! Please don't hesitate to ask any questions anytime. Thanks, cj firstname.lastname@example.org.
If it is not going to be her primary residence then she needs to let her lender and the property's insurance company know this in advance, which will make her loan rate and insurance premium a bit higher than if it were going to be owner occupied. And her property insurance will likely not cover your personal property, so if you want coverage for that you will need a renters policy.
I am real estate agent and not as well versed in this as an insurance agent would be. If you'd like a referral I know a good one -- very easy to talk to and good at explaning your options -- let me know.
Also, if your daughter would like to consult with and be represented by a Buyers Agent I'd be happy to talk with her and see if she and I might be a good match to work together.
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Your daughter can put you on the loan with her.The loan will be subject to the lower of the credit scores between you and your daughter.
This would be considered a non occupant coborrower or in FHA speak 'family condo'. These programs are considered owner occupied because you would be on the loan first.
This way she can obtain owner occupied financing.
If she wants to keep it 'clean' and just rent to you, then she would need to purchase the property as a non owner occupied. Rates and fees are higher on the nonowner loans. cg
You have already read some thorough and comprehensive answers. Allow me to offer a simple one: A written lease, an accurately written offer to purchase, and full disclosure to your daughters lender and home owners insurance company are all that is required for you and your daughter to be in complete compliance.
Of course, all legal questions should go to your attorney.
However, this one, at face value seems simple.
Your daughter may purchase any home she chooses, if she has the capacity to do so.
And, of course, she may rent that home to anyone she chooses, including her mother.
If there are any circumstances of which I am not aware, this may preclude such an arrangement, but, at first blush, I see no roadblocks.
Nevertheless, always consult your attorney.
Always in your service,
Michelle RenÃ©e Mozell
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