How to report rental income when taking over someone's mortgage

[LillianHo]

Hello all the REIN experts, I am in the process closing a property with a seller. He has agreed for me to pay his equity portion and take over his mortgage. For my understanding, he will be still on the title until I take over the mortgage , and for now I will have "right to purchase" on the title. Okay my question is:

After we sign purchase agreement, I will pay owner for the mortgage payment, property tax, insurance and all the expenses and act as an owner. Tenant will pay rent to me. Since he is still on the mortgage and on the title, how do I report rental income as tax purpose? Is it doable? Anything I should bewared of when I take over someone's mortgage? Thanks for your advice!

 

[Cory Sperle]

Are you taking over the mortgage or aren't you? It sounds like you've done an agreement for sale type of deal, and will obtain title and your own mortgage when his comes up. It would not be any different than reporting any other rental income, report it but instead of deducting the interest your paying on a bank mortgage, deduct the interest your paying to the owner.

 

[LillianHo]

Thanks Cory, I got it. I will report rental income and expenses as regular rental property.

 

[Thomas Beyer]

Differentiate between legal and beneficial ownership. You are doing an agreement for ( future ) sale but are the beneficial owner today. Yes, you have to report it as if you are the legal owner for accounting and tax purposes.