Expert: Jessica Bryan - 11/14/2009

Question
Hi
We live in northeast NJ where prices and taxes are high compared to many other states.  My single 25 year old live at home son wants to invest in buying real estate.  He has $15,000 to put down.  I thought it was a good idea if we went in together and I added $15,000 so we have more $ for a better location or house.  I have a few questions:
1) He would be the "buyer" to take advantage of the $8,000 first time buyer credit and I would be like a silent partner. Is that possible or is there a better way where we are both listed on the mortgage and the Title.
2) Because he is looking to spend around $175,000 max, he is looking more at condos and I would prefer a house because I think a house would go up in value more than a condo in 3 to 5 years period.  We would like the rent to cover the mortgage and make the profit from selling in 3 to 5 years.
3) Do you know if the $8,000 credit can be applied to the down payment or closing costs?


Answer
Dear Lou;
First of all, the tax credit for first-time buyers does not apply to investment properties but to primary residences.  There is also an incentive that is now available to current homeowners who have lived in their home at least five of the past eight years.  You should consult a lender and find out which situation applies to you and to your son.  However, from the way that you represented your interest neither will apply.  If I am mistaken, and you intend to live in the home or condo, then my advice is to buy the residence that will appreciate the most.  As a rule a new home in a "hot" area will be the best investment.  This is usually a single-family residence (detached).  Occasionally, a trendy townhouse community can be the best investment.  How do you decide?  Ask a Realtor to help and evaluate.

As for the question regarding the "silent" investor...there are several ideas that come to mind and again it depends on tax ramifications, finances, credit scores, etc.  A good and well-informed lender can discuss your options and the current programs available.  These change often and therefore a lender is the best resource for options and guidelines.

Best wishes,
Jessica Bryan