Expert: Dick Dennis - 9/1/2011

Question
Hello
I plan to purchase a new mobile home for my daughter in another state. I will pay 100% in cash.
Park is ownwer occupied only, but I've been told it's ok as long as her name is on the deed, or title, not sure.
Can I treat this as investment property if she pays an affordable (for her) rent? She would pay monthly lot fee and utilities. I'd pay taxes, insurance, repairs.
Any issues if she decides to buy it from me at some
time? Could she get a mortgage for a property that may have her listed as a co owner?

Answer
Most likely, Mike, the ownership of the mobile home will be reflected on a document much like your car since it is the DMV that takes care of the title of mobile homes if it is not on land you own. So, you should ask these questions of the DMV office. Having a loan on a mobile home, again, would be something like a loan on your car. Only it is more difficult to qualify for a loan for mobile home loans because they are harder to sell and they do not hold their value as well as a regular home. This is a concern for banks. If she has extra good credit, then you may not have any problems getting a loan.

However, my recommendation is to buy your daughter a regular, good conditioned residence in a decent neighborhood. Both of you can get a loan on it if you put a substantial amount as down payment. The IRS is very picky about charging rent to family. They want to make sure you are within a reasonable rental market because you will have to keep books on the rental and you will have to declare it as a rental on you 1040 return. I also recommend you talk with a CPA or other tax expert to learn how to handle this properly.

That's one reason why I suggested to consider buying a regular residence. You won't have any problems if you both own the property. But still ask the tax expert to make sure. I do wish you well.

Dick Dennis
dixiedee13@aol.com