How To Refinance An Inherited Property To Buy Out Heirs

You’ve inherited a property and now you
want to know how do I refinance it. In today’s video, I’m going to actually
share with you how do you refinance it, what are your selling options and how do
you do it and keeping the family together instead of tearing at each
other’s throats. So, how do you actually refinance
inherited property. You know, this is surprisingly a question that I get more
often than you might think. People actually come here and they know that
I’ve done thousands of deals and they want to know, “Kris, what do you do when
you’re working with families where there’s been a death in the family,
properties been inherited.” And so today, I’m going to talk about this magic word
right here. How do you actually refinance inherited property. And to really kind of
dive deep into this and help you get this conversation. I think you need to
understand that this is this can be for many people a sensitive conversation
piece. And the reason predominantly is because there’s sentimentality issues.
Someone died and someone’s feeling like, I can’t let go of mom and dad yet or my
great-uncle or so-and-so so let’s hold on to the property. And usually the
property is not always in the best of condition if someone was at the end of
their life. That’s not always the case. And there’s…
What it does is it creates an opportunity for argument among siblings.
So, once says, I want to sell it. One says that I want to hold it. And then it
becomes this game of, “Wait a second. Can I actually buy out my siblings and still
keep the property?” Hence, the conversation about the refinance. Refinance basically
says we don’t want to sell the property but we need to get some money out of it
that we can give to some people so that we can buy out the heirs. And those
people that basically have title to the property. And refinance is a great
solution because while some might want to keep and some might want to sell. For
those that want to keep, the other areas that want to sell guess what they need
or want. They usually want the money and they just want to move on. Those that
want to keep the property maybe they’re trying to honor some past person’s
wishes and or maybe they think this is a great opportunity to turn it into an
investment property. So, let me just say a couple of things on that. First of all,
don’t try to become an expert investor on an inherited property that you’re
like, “Let’s turn this into a moneymaker.” It might actually be. But I’m just
telling you not out of t10 times when I’ve dived into this scenario do you
know what it is? Dude, the property you inherit usually isn’t going to make a
great rental. It’s usually not going to make a great anything. Get that thing sold get
rid of that thing. And that’s just because I don’t want to
like walk into a property and have to make up a business plan for it. Unless
there’s a plan that immediately makes sense. The best thing that you can do the
thing that actually makes the the most sense for you is to ask, how can I help
my siblings or the other people that have titleist property feel comfortable
with their solution? They need cash. How you do that is with refinance. Let me
walk you through how that happens. Okay, so out of all the siblings, some are in a
better position than others to actually refinance the property. Even those that
might even want out of it. You can get a little creative because there’s multiple
parties. But generally, you’re looking for someone that has good credit in the
family. You’re also looking for someone that has a job. A stable job they’ve had
it for at least 2 years. Now, if they have good credit and they’ve had a job
for 2 years. And more importantly, let’s just say that this is a person who lives
within their means. The banks have a different ratio for how they calculate
that. They call it a DTI which means debt to income ratio. Basically when you have
a really high debt to income ratio. It means that you’re strapped for cash. If
you’re the type of fiscally responsible person that has things paid off, you know
or low obligations then you’re going to have a low debt to income ratio. And it’s
these 3 things. When the bank says, “You got good credit, you’ve had your job
for 2 years in the same industry.” Even if you had to switch jobs. But you also
have you know your expenses under control. That’s where a bank basically
says, “Fine, let’s do a refi.” However, most banks will not do an immediate refi.
They’re actually going to want to see you on title for a period of time. So, you
need to create an agreement with the family and then what you want to do is
you want to take the credit worthy individual and you want to put them on
title. And you want to do this right away because the banks might want to see them
here for up to 24 months. And some of you’re like, “Wait, wait. We need a solution
faster than that.” Then consider selling it. But if it’s sentimental you want to
keep it. Now, there might be some banks that say, “Hey, you inherited this property?”
You know because of its low debt to income ratio, you can actually you know
refinance this right now. You don’t have to wait 24 months. I just want you to be
aware that it can take up to 24 months. You
also have the opportunity for the person that wants to keep the home to
technically do what’s called a purchase. Where they’re actually going to say, “Hey…”
You know, let’s do an example here. Here’s a home that we inherited. It has a value
of $300,000. The family owes $50,000 left on it. And they’re saying, “Alright. If we
refinance it, it’s going to take 24 months.” Do we have another option?
Well, this same creditworthy person that has a good job good credit good debt to
income ratio, they could actually say, “I’m going to purchase this property.” And
though… And preferably this is the person that wants to keep the property. So, if
it’s the one that wants to keep it, let’s just say it’s going to be split 3 ways.
What we’ve got $250,000 of equity. If you were
to fire sell it in the market, not fix it up. Depending on the market, maybe you’d
let go of it at 250. So, let’s just do that example. Let’s just
say there’s $200,000 left to split. So, a decision gets made.
Alright? We’re going to split that 3 ways. That’s pretty much $67,000 to each party. And so, the person buying it says, “Great, I’m
going to I want to keep the house. So, I want to actually get my money in the form of
a discount.” So, I’m actually going to purchase the property for $233,000. Even though it’s worth 300. And
that’ll be my cut. Well when that sells, the difference between what’s owed in
the 233 releases the rest of the money for the other two sibs to
get their cut and now they’re out of the deal. So, refinance could take some
patience. Selling it is what you do when you don’t have a lot of time. And you
just need it to go a heck of a lot faster. Now, let me show if you would have
actually done with a lot of people who have inherited property. You see there
are some that might be watching this channel saying, “But Kris, I want to
invest with you like that’s what makes the most sense with me.” I want to
become an investor. I want to use the money I inherited and I want to buy some
more real estate. And if that’s the case, the whole family doesn’t need to be in
agreement although I’ve seen that happen as well. Sometimes those that do get
their money out so that they can actually start investing. And what that
means from time to time is that I’ve actually been privately involved and
actually helping resolve some of these scenarios. That’s where a lot of this
information comes from. And so, for the they’re thinking, “Wait. We inherited this
money.” And instead of just using it to pay off debts, pay off a car, pay down the
mortgage, don’t do that. That’s one of the biggest mistakes that most people make.
They take the money and they basically want to throw it at something that’s
going to do no good for them. All its going to do is reduce a payment or eliminate a
bill. This is the perfect time you’ve been given a gift. That money, invest it.
Trust me, you get it to actually grow for you. I know you want to pay off your
debts but instead of trying to pay off your debt, take that extra money and grow
it and let the growth eliminate the debt. Even service the debt along the way.
In fact, I created a video here. You see, I partner with people all over the world
that find me on this channel that say, “Hey, I got some money in a 401k or an IRA
or I inherited a property. We want to be smart with our money. We want to grow it.
And Kris, I hear that you’re doing 20 to 30 percent annual returns on.” Your you’re
doubling your money every 4 or 5 years. So, if you if that’s interesting
and you’re thinking to yourself, “You know what? Rather than just figure out how to
get this money and do something with it, I actually want to learn the most
responsible thing I can do with it.” I’m going to invite you right now to watch the
video that I’ve got queued up right over here for you. It’ll help you understand
that if you’ve inherited some of that money before you just decide upfront
what you’re going to do with it, figure out what could happen to it how you could
multiply it a short period of time if you had the right partner and if you
have the right strategy. Check that link out. Rest of the details you can find in
the description below and I look forward to seeing you on tomorrow’s video.

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