Author Topic: Broke FIL wants to sell us his FL condo for $1 while he continues to use it.  (Read 4004 times)

champion

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@StressExpress.  You raise an interesting point about pride.  And we do want to treat my FIL with respect. 

But pride in "providing" an inheritance is delusional in this case.  His current net worth is negative.  He already spent through his other several hundred thousand in inheritances while working full time.  Now he's voluntarily reduced his work hours and the condo is the only asset left.  The odds that he won't need that value for anything during his next 20 years of life expectancy seems slim.  Wouldn't we be catering to his delusions if we pretend that he's a rich guy leaving his daughter some real estate?  Don't we instead have an obligation to send him to a financial planner to help him understand the expenses he's likely to face as he gets older?  And to understand the consequences of his current behaviors like reducing his work hours by half because he wants to relax while he still has $50,000 in credit card debt? 

If there was no Medicaid eligibility question and this was cash instead of a condo, it would be strange (I think) for us to accept this value.  We'd be emptying the checking account of someone who is 70 years old and in debt.  (It would be safer in our hands than his, but protecting that money for his later use is not what he's trying to proudly achieve.)

What am I missing?  Your situation sounds different from mine because you have no family dynamic worries.  But I'm curious about the rest of the considerations in your case.  Are you accepting some real estate specifically to protect it from Medicaid's requirements that assets be spent down before someone can be eligible?  If so, I can see the mutual benefits, but what about the costs?  Doesn't the giver weaken their own financial situation dangerously, leaving them less prepared for non-Medicaid old age expenses?

You've got a very interesting perspective that could help me.  Please tell me more!

Dicey

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I realize you may not need the money but it would likely be extremely depressing for him to know he died broke with nothing for his family.
Uh, not to sound too harsh, but if he's dead, it isn't going to matter. I don't think dead people get depressed. Next, it spunds like his daughter has more now than he does, so she won't "need" anything material from him anyway. He could focus on leaving his family with wonderful memories that cost little or nothing.

BTW, thanks for coming out of lurk-dom. Sorry to oppose your first post here, but we call it as we see it here, as you surely know by now.
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champion

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Just to clarify, his daughter has more than her father only due to marriage to me.  In fact she has huge student loans.  (She's frugal and sensible, otherwise, though, unlike her father.)  But a big thing underlying my concern is that FIL will likely want his daughter to help him out at some point.  But since she's effectively my dependent, I don't really want her taking on a dependent of her own! 

Finances_With_Purpose

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Just to clarify, his daughter has more than her father only due to marriage to me.  In fact she has huge student loans.  (She's frugal and sensible, otherwise, though, unlike her father.)  But a big thing underlying my concern is that FIL will likely want his daughter to help him out at some point.  But since she's effectively my dependent, I don't really want her taking on a dependent of her own!

This all points to a hard no.

There's another possibility, too, which I haven't seen yet: you take the only assets from a person with a negative NW/who could go bankrupt, and you may have creditors seeking you eventually for his debts.  Only a debt/asset/estate lawyer would know how all of that would work, but it could be a can of worms.  They might try it even if it's only quasi-legal.  At least if they know (or find out in estate proceedings) that he "gifted" this to you while insolvent or headed towards insolvency.  (So I don't know how likely that is.)  They can always say it was fraud committed to avoid having to give up the house and send collections for you or file a lien on the house.  The more I think about it, the more doubtful it seems, but it is one of the many cans of worms you allow someone to pop open when doing a deal with someone who can't manage money. 

With all of the family issues, this would be an easy hard pass for us.  Plus, the fact that he doesn't manage his own finances well now is key: I don't go into complicated and personal business transactions with people when I *know* at the outset that they manage things poorly - it only spells trouble.  (Even the Bible warns against taking on someone else's debts, which is basically what you would be doing - albeit with an asset too.) 

I would actually be *more* willing to pass on this transaction and then help later on, depending upon the situation (putting in necessary boundaries, and not giving help that hurts - subsidizing his poor management).  Maybe help with some parameters, etc. 

jezebel

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Just to clarify, his daughter has more than her father only due to marriage to me.  In fact she has huge student loans.  (She's frugal and sensible, otherwise, though, unlike her father.)  But a big thing underlying my concern is that FIL will likely want his daughter to help him out at some point.  But since she's effectively my dependent, I don't really want her taking on a dependent of her own!

She's your dependent?  That is a bizarre/inaccurate way to view your wife whether she has high student loans or otherwise.  I suppose my spouse depends on my higher salary only in the sense that it's what I bring to the table, financially speaking.   It's jointly owned now, so...

StressExpress

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@StressExpress.  You raise an interesting point about pride.  And we do want to treat my FIL with respect. 

But pride in "providing" an inheritance is delusional in this case.  His current net worth is negative.  He already spent through his other several hundred thousand in inheritances while working full time.  Now he's voluntarily reduced his work hours and the condo is the only asset left.  The odds that he won't need that value for anything during his next 20 years of life expectancy seems slim.  Wouldn't we be catering to his delusions if we pretend that he's a rich guy leaving his daughter some real estate?  Don't we instead have an obligation to send him to a financial planner to help him understand the expenses he's likely to face as he gets older?  And to understand the consequences of his current behaviors like reducing his work hours by half because he wants to relax while he still has $50,000 in credit card debt? 

If there was no Medicaid eligibility question and this was cash instead of a condo, it would be strange (I think) for us to accept this value.  We'd be emptying the checking account of someone who is 70 years old and in debt.  (It would be safer in our hands than his, but protecting that money for his later use is not what he's trying to proudly achieve.)

What am I missing?  Your situation sounds different from mine because you have no family dynamic worries.  But I'm curious about the rest of the considerations in your case.  Are you accepting some real estate specifically to protect it from Medicaid's requirements that assets be spent down before someone can be eligible?  If so, I can see the mutual benefits, but what about the costs?  Doesn't the giver weaken their own financial situation dangerously, leaving them less prepared for non-Medicaid old age expenses?

You've got a very interesting perspective that could help me.  Please tell me more!

Glad to share my perspective, but want to understand one key item - does the Rental make money?  It would seem that a zero cost asset would make quite a bit renting 6 months a year over and above expenses in a vacation destination.  Numbers make a difference here, but being scared of perceived risks in a rental market mean little without understanding the cash flow.  If this is not the case, things change below... then it is really a liability.

So my situation is a bit different in a few ways which make it preferable to yours so will start there:
- the the family member has a pension that will cover monthly needs as long as needed but their savings and assets will never satisfy a major health issue and long term care.   
- They are very emotionally attached to providing an 'inheritance' and are want to gift some money (25K and House).   
- If the family member ever did need money, it would be a huge priority for us to help them and we would feel blessed to be a position to do it with or without this 'inheritance' (basic needs/care not frivolous spending).   This seems to be different than a lot of others on the forum who would deny assistance for Mother/Father who didn't take care of their money.
- The house is a rental and it cash flows much more than expenses
- I already manage rentals and this is no impact to my family to take on the management

Having said that, let me try to address a couple of the questions you posed from my perspective:
Is it a delusion that its an inheritance and should you cater to it?
- if it produces income as a rental and the transaction stands on its own merit, I personally don't think its delusional.  They are providing you with 100K value in a future sale of asset and any income it can produce in the interim.  If it makes money - it provides value to your family that you may not get in the interim and/or the future.   Would you get it if they die? - Maybe
- Given the issues with his finances and your feeling that he will need help in the future would make me more likely to take it now.  Meaning, will you really turn him down if he has basic needs that aren't being met later in life?  If its for extravagances or frivolous - you now have a reason to have that discussion now and enforce later - and you should (or your wife - his daughter, should is how it would work in my family).
   i.e - Start the conversation vs. saying "Thanks!"  Share your concern about his need for the money in the future vs. giving to you now.   Share that you think he should consult a financial planner first so he understands impacts/costs of future needs.  If he still wants to move forward, be clear that any time that costs exceed income for the rental, that you would sell it, period.   If you sell, invest the money in a separate account in case he needs it for basic needs (income from any rental activity goes to you for management).   I would tell him (or his daughter tell him rather) that you do not want to be in a position in the future where he feels you owe him vs. this being a kind gift and to be accountable to him on getting it back as you are concerned it will cause future family problems.  Write it down, agree (go forward) or not (don't).   From the Dynamic you talk through, if he has desires to have you support him, this should come out very clearly in the discussion and you can back away if needed.   

The questions about it being different if it was cash is odd to me, you seem to think you are doing something to him (cleaning out his checking) vs. him doing something for you (or rather his daughter).  He can blow his money however he sees fit (give it, spend it, etc), if he is of sound mind and wants to put himself in a worse financial situation intentionally, the only real reason to care is if you feel your more likely to spend more in helping him.  You will either help him or you won't and if you (or your wife) makes it clear up front, i doubt that is going to change.

Lots of the focus on your wife driving this conversation as I think it would eliminate the feeling that you are telling her what to do vs. her controlling the relationship with her father.  If not, may be headed toward a fight with the wife when it comes up later anyway.

Typed rather fast, can revisit later when i have some time but feel free to let me know if I can be of any more help.   Our situations are clearly different and the family dynamic of potential future actions clearly causes a lot of concerns that I don't have to deal.  I can certainly see how it complicates it more for you.
« Last Edit: January 12, 2018, 05:54:20 AM by StressExpress »

StressExpress

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I realize you may not need the money but it would likely be extremely depressing for him to know he died broke with nothing for his family.
Uh, not to sound too harsh, but if he's dead, it isn't going to matter. I don't think dead people get depressed. Next, it spunds like his daughter has more now than he does, so she won't "need" anything material from him anyway. He could focus on leaving his family with wonderful memories that cost little or nothing.

BTW, thanks for coming out of lurk-dom. Sorry to oppose your first post here, but we call it as we see it here, as you surely know by now.

No problem with the oposition - interesting responses from people thinking about their parents in this thread to me.

In terms of being dead - If he asked the question after he had died, you are right he wouldn't care.  it's the time between now and then that seems to be the problem we are discussing :)

In terms of focus - wouldn't it be great if we could just tell people what to value and focus on, things would be so easy...

ooeei

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I realize you may not need the money but it would likely be extremely depressing for him to know he died broke with nothing for his family.
Uh, not to sound too harsh, but if he's dead, it isn't going to matter. I don't think dead people get depressed. Next, it spunds like his daughter has more now than he does, so she won't "need" anything material from him anyway. He could focus on leaving his family with wonderful memories that cost little or nothing.

BTW, thanks for coming out of lurk-dom. Sorry to oppose your first post here, but we call it as we see it here, as you surely know by now.

No problem with the oposition - interesting responses from people thinking about their parents in this thread to me.

In terms of being dead - If he asked the question after he had died, you are right he wouldn't care.  it's the time between now and then that seems to be the problem we are discussing :)

In terms of focus - wouldn't it be great if we could just tell people what to value and focus on, things would be so easy...

Keep in mind OP wrote this 6 years ago:

Quote
Here's one situation. My father in law has significant debts and no savings. He's always had a decent income, top 25% of Americans or so, but he has consistently lived beyond his means and just never saved a dime, and racked up lots of debt along the way. He's a big spender type--driving a (leased) SUV makes him feel special, for example. He's deep enough in the hole at his current age of 65 that he'll never be able to accumulate any retirement savings, even if he dramatically and voluntarily changes his lifestyle, which is unlikely.

So, I worry that he will come to me and my wife at some point and say, hey, I need money. By the time he realizes how little resources he has, he may find it very difficult to generate any income himself. We'll have assets and capacity for income producing employment, and he'll know it. My wife (who is incredibly close to her father) will find it very difficult to see him suffer in any way--she'll want us to give him money. And if he needs some money for bills or medical care or even for a trip to see his grandkids or something, it will be hard for her to see his needs and our accumulated savings and not want to just hand over chunks of money.

This is all upsetting to me. I feel like I have a huge looming liability. He's still healthy and making a decent income.  I resent the idea of being the ant to his grasshopper. I feel guilty and selfish for thinking this way. But the guy is a financial train wreck. I would never directly marry a person like him. And yet, I fear that his financial problems will be a part of my life, one way or another. The biggest problem is that it interferes with my ability to feel in control of my own saving and financial planning. If I moderate my own lifestyle to save money, and the result is a pile of money that I will be considered heartless not to share with my bad-with-money father-in-law, it makes the saving a lot less fun.

It's fine that you want to support your family even if they're bad with money, but not everyone feels the same way about that. I can say if someone was constantly living more extravagantly than me I'd find it really tough to turn around and support them financially when they finally went broke.

This entire transaction is just asking for family trouble. They're on the hook for supporting him for his "generous" gift in which case any value they are getting out of it is probably eaten up, along with them having to manage a rental in another state which he still wants to use as a vacation home. I've seen two of my aunts give each other the silent treatment for 10 years over a $10k roof, and I never would have guessed that would happen before it did. We aren't some trainwreck dramatic family, or at least didn't seem like it.

It would be one thing if they were already looking for more rentals and it was in their hometown, or if it was a no strings attached gift. As it is they aren't looking for rentals, it's in another state, and FIL still wants to use it regularly which will make renting it even more difficult, plus now they "owe" someone who's horrible with money, but what they owe him is tough to measure.

http://jlcollinsnh.com/2014/02/20/case-study-10-should-josiah-buy-his-parents-a-house/

This is a great read about how buying a house for/from a relative can go badly, even when it seems like a good idea. Family dynamics around money can be very complicated, especially when the views on money don't align. If this was a $1,000,000 condo I'd say go for it full stop. As it is the juice doesn't seem worth the squeeze for a $100k asset.

Welcome to the boards!

StressExpress

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d
I realize you may not need the money but it would likely be extremely depressing for him to know he died broke with nothing for his family.
Uh, not to sound too harsh, but if he's dead, it isn't going to matter. I don't think dead people get depressed. Next, it spunds like his daughter has more now than he does, so she won't "need" anything material from him anyway. He could focus on leaving his family with wonderful memories that cost little or nothing.

BTW, thanks for coming out of lurk-dom. Sorry to oppose your first post here, but we call it as we see it here, as you surely know by now.

No problem with the oposition - interesting responses from people thinking about their parents in this thread to me.

In terms of being dead - If he asked the question after he had died, you are right he wouldn't care.  it's the time between now and then that seems to be the problem we are discussing :)

In terms of focus - wouldn't it be great if we could just tell people what to value and focus on, things would be so easy...

Keep in mind OP wrote this 6 years ago:

Quote
Here's one situation. My father in law has significant debts and no savings. He's always had a decent income, top 25% of Americans or so, but he has consistently lived beyond his means and just never saved a dime, and racked up lots of debt along the way. He's a big spender type--driving a (leased) SUV makes him feel special, for example. He's deep enough in the hole at his current age of 65 that he'll never be able to accumulate any retirement savings, even if he dramatically and voluntarily changes his lifestyle, which is unlikely.

So, I worry that he will come to me and my wife at some point and say, hey, I need money. By the time he realizes how little resources he has, he may find it very difficult to generate any income himself. We'll have assets and capacity for income producing employment, and he'll know it. My wife (who is incredibly close to her father) will find it very difficult to see him suffer in any way--she'll want us to give him money. And if he needs some money for bills or medical care or even for a trip to see his grandkids or something, it will be hard for her to see his needs and our accumulated savings and not want to just hand over chunks of money.

This is all upsetting to me. I feel like I have a huge looming liability. He's still healthy and making a decent income.  I resent the idea of being the ant to his grasshopper. I feel guilty and selfish for thinking this way. But the guy is a financial train wreck. I would never directly marry a person like him. And yet, I fear that his financial problems will be a part of my life, one way or another. The biggest problem is that it interferes with my ability to feel in control of my own saving and financial planning. If I moderate my own lifestyle to save money, and the result is a pile of money that I will be considered heartless not to share with my bad-with-money father-in-law, it makes the saving a lot less fun.

It's fine that you want to support your family even if they're bad with money, but not everyone feels the same way about that. I can say if someone was constantly living more extravagantly than me I'd find it really tough to turn around and support them financially when they finally went broke.

This entire transaction is just asking for family trouble. They're on the hook for supporting him for his "generous" gift in which case any value they are getting out of it is probably eaten up, along with them having to manage a rental in another state which he still wants to use as a vacation home. I've seen two of my aunts give each other the silent treatment for 10 years over a $10k roof, and I never would have guessed that would happen before it did. We aren't some trainwreck dramatic family, or at least didn't seem like it.

It would be one thing if they were already looking for more rentals and it was in their hometown, or if it was a no strings attached gift. As it is they aren't looking for rentals, it's in another state, and FIL still wants to use it regularly which will make renting it even more difficult, plus now they "owe" someone who's horrible with money, but what they owe him is tough to measure.

http://jlcollinsnh.com/2014/02/20/case-study-10-should-josiah-buy-his-parents-a-house/

This is a great read about how buying a house for/from a relative can go badly, even when it seems like a good idea. Family dynamics around money can be very complicated, especially when the views on money don't align. If this was a $1,000,000 condo I'd say go for it full stop. As it is the juice doesn't seem worth the squeeze for a $100k asset.

Welcome to the boards!

Great points and thanks for the history and the case study, i read both.  Certainly not saying i am correct here, just wanting to share my perspective since it seemed to be a little different.

It seems to me that regardless of the transaction here, this is headed to a tough spot.  Wife cares for father, father going to be broke, wife is likely going to want to help father, and OP will be very resentful to spend any hard earned/saved money on FIL.  If they do nothing here - this seems to be the path they are headed down.   There is a inevitability here that is going to require a very hard decision regardless which will leave either wife or OP very unhappy (support FIL in some way or deny any assistance).  This may be the opportunity to have the discussion (in either direction) about his finances and what, if any, support you provide so that you can feel more secure in your own savings/plan.  The emotional component wife will be difficult to work through either way so best to have a lot of clarity between father/daughter in my opinion.  Maybe old-fashioned, but I would not expect my wife to lead this decision/discussion for my parents and she would not expect me to lead it with her parents.

On the transaction itself, yes there are lots of ways that this could be a bad investment, and any of those would make me say no, need all the details to make sure.  I liked hearing you would do it for $1M, as that is what I was trying to get at initially is that the transaction needs to stand on its own.   Depending on the outcome of the conversation and evaluation of the transaction, would need to see if it was worth it in total. 

champion

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@StressExpress

You are right.  The real looming problem isn't the condo, it's the fact that FIL is heading for a financial disaster in old age which could impact our finances and our relationships with him and each other.  Do you have any suggestions on this set of core issues which you correctly see as more important than the condo?

As for the condo as an investment, I haven't seen numbers of all cash inflows and outflows.  I only know what I've been told.  But roughly, it's:

$100K current market value
no mortgage
55-plus community
20 min from great beach
taxes and fees of about ~$7500/year
other costs would include maintenance, costs of landlording (including flying there to check it out periodically), and any special assessments
rentals allowed for 6 mo/year
last few years $2000/mo long term renter for 5-6 mos ($10,000-$12,000 total)
higher effective rents might be possible with series of shorter vacation rentals, but with some additional costs and efforts required.   
Over past few years (before making this offer), FIL has described the rentals as "paying for the costs of the condo," never as an actual money-maker.

So, that's what I know.  Any thoughts?

Zamboni

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@StressExpress
As for the condo as an investment, I haven't seen numbers of all cash inflows and outflows.  I only know what I've been told.  But roughly, it's:

$100K current market value
no mortgage
55-plus community
20 min from great beach
taxes and fees of about ~$7500/year
other costs would include maintenance, costs of landlording (including flying there to check it out periodically), and any special assessments
rentals allowed for 6 mo/year
last few years $2000/mo long term renter for 5-6 mos ($10,000-$12,000 total)
higher effective rents might be possible with series of shorter vacation rentals, but with some additional costs and efforts required.   
Over past few years (before making this offer), FIL has described the rentals as "paying for the costs of the condo," never as an actual money-maker.

So, that's what I know.  Any thoughts?

As a rental just from a purely financial perspective, I would have some reservations about the deal.
My first concern is the 55+ restriction.
My second concern is the location . . . quite far from the beach by vacation rental standards, even if it is a very nice beach.
My third concern is the restrictions on renting to 6 months per year.

Best case scenario:
Let's say someone is paying $2K per month and it is rented out for the full allowed time with no vacancy. If that is all true, then it barely meets the 1% rule if you bought it for the fair purchase price of $100K. Of course, the 1% rule doesn't really apply here given the high fees/taxes and all of the complicated strings attached (has to be an older tenant, can't be a year round tenant, etc), and I think the taxes/fees/maintenance/management will make it cash flow negative.  Based upon what you are saying about the level of taxes and fees, it could even be (and I think probably will be) cash flow negative as a free gift . . . which really wouldn't be a gift at all, would it?

Will you really be able to find someone to pay $2K per month and rent it out for the full allowed time with no vacancy? I honestly have my doubts about as most non-waterfront Florida property in general is not particularly valuable . . . do you trust his word on the rent amount? was this just a fluke that he had a tenant, and now that tenant is gone? is it not weird that the tenant wants to be there the opposite of the time your FIL wants to use it? Have you looked on Zillow or another website to see what the going rental rate is for a similar-sized unit in the immediately surrounding area?

That brings it back around to this: FIL is actually losing money on it, or has been having trouble finding tenants so thinks he will start to lose money, but he likes being able to vacation there himself, so he doesn't want to sell it. He wants to unload the hassle and expense of it while still enjoying having use of it for the rest of his days. He thinks this is what you want for him, too, and then you can sell it when he dies for around $100K. . . that's why he thinks he's doing something for you. Run away!

MayDay

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My grandpa owns a nearly identical condoning terms of location and rental rules. It is 55+, 15 minutes from a beach, and you can rent it half the year.

People seem to have no trouble renting them, but I don't know what they go for. Basically snow birds rent them for the winter, and the owners use them in the summer or not at all. Personally I don't know why you would want a Florida condo you can only use in the summer. Seems like people buy them before they retire, and use the winter rental income to pay down the mortgage until they retire and can snowbird.

Anyway.

I would run.
Journal:  http://forum.mrmoneymustache.com/journals/mayday's-journal/350/  featuring children, chickens (new!) and other ch words.

chrisgermany

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Once you are the owner,  wouldn't the stay of your FIL be regarded as rent under the rental rules?

champion

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Interesting points.  Yes, it feels like it's slightly cash flow positive on the numbers as given, but cash flow negative if we value our time at a reasonable hourly rates and if we factor in possible assessments over the next few decades (e.g., if you clear $2K/year, one $10K assessment erases 5 full years of positive cash flow).  Or if you assume that a tenant commits and then flakes and you lose a few months to vacancy here and there, this starts to look potentially cash flow negative. 

As Mayday says, the idea here is to rent the condo out during high season, between Dec and May or so, and then use it yourself in, yes, the hotter months.  That's what's been going on here and is the way to get tenants.  I assume it would be much harder to rent out in July and August.

I don't think FILs visits would be considered rentals by the condo association.  That would sort of be us the owners using it for a family visit.  And FIL knows the neighbors so it wouldn't be a problem.  But if it ever turned into a problem, and FIL claimed one of the 6 rentable months, the cash flow would go down further. 

One interesting point by @Zamboni is the idea that FIL hit a bump on the condo which motivated the offer.  It's mid-Jan, so presumably the tenant should already be in there.  If it turns out that the condo is unexpectedly vacant right now and that motivated the gift offer, that would be telling and disappointing. 

I think it was probably motivated more by worries about aging, Medicaid, etc.  But if FIL was suddenly feeling the pinch of the condo costs because of an undisclosed hiccup in the "it pays for itself!" program, and that's what motivated the offer?  That would indeed be a bad sign of less-than-altruistic motives and less-than-full disclosure.  It wouldn't mean he had nefarious motives--a hiccup might have just gotten him thinking.  But if, in addition to the Medicaid considerations, he finds himself wanting to offload the costs and hassles, it suggests they are significant. 




StressExpress

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@StressExpress

You are right.  The real looming problem isn't the condo, it's the fact that FIL is heading for a financial disaster in old age which could impact our finances and our relationships with him and each other.  Do you have any suggestions on this set of core issues which you correctly see as more important than the condo?

As for the condo as an investment, I haven't seen numbers of all cash inflows and outflows.  I only know what I've been told.  But roughly, it's:

$100K current market value
no mortgage
55-plus community
20 min from great beach
taxes and fees of about ~$7500/year
other costs would include maintenance, costs of landlording (including flying there to check it out periodically), and any special assessments
rentals allowed for 6 mo/year
last few years $2000/mo long term renter for 5-6 mos ($10,000-$12,000 total)
higher effective rents might be possible with series of shorter vacation rentals, but with some additional costs and efforts required.   
Over past few years (before making this offer), FIL has described the rentals as "paying for the costs of the condo," never as an actual money-maker.

So, that's what I know.  Any thoughts?

Let me start with my thoughts on the rental vs. the more important topic of impending financial disaster just due to time and this being more my wheelhouse.

The numbers are not great from what you shared, but if it were me - i would do some more due diligence to see what we are really talking about.
- I always start with rental records.   Ask FIL to provide you with the last 5 years of rental history and all associated expenses on the property.  You need to see insurance, taxes, repair items, HOA, heat, water, electric, cable, wifi, phone, cleaning, etc.   You want a P&L, but if he doesn't have it, build it with the data he provides so you can have a clear view.   If he does not have any records - that's a red flag and requires more work to understand.
- Ask FIL to request the financial records including all assessments, budgets, reserves from the HOA and to share them with you.
- Ask FIL to provide the HOA covenants including all limitations on rental property.
- Go to Homeaway and find condos in the same association (hopefully multiple) and get an understanding of what rates they are charging.  Reach out to the owners or property managers of these condos and see if you can get them on the phone.   Tell them you are considering purchasing within the complex and see if you can get them to share their experiences in renting, concerns with area/condos, and any information they will provide on rent/profitability/vacancy/surrounding area/etc.   If you get a management company, ask how much they charge to manage, how many units they manage in the building, and what history they can share on managing within this complex.   Owners and Mgmt companies will be a great source of information if you can get them talking.
- Map out the business for the next 10 years based on the information that you know and what your exit strategy is (sell, etc). Rents, expenses, expected assessments, etc and see where you net.   Include all aspects of the sale as well (realtor fees, taxes, etc).  Do an Risk and Opportunity assessment so you can fully understand what could happen and what that would mean (big assessment, insolvent HOA, Rent increases, appreciation, etc). 
- Consult an account or lawyer if needed to discuss concerns with income, taxes, gifting, etc
- Call a local real estate agent and ask for comparable sales in the same condos.
- Model other scenarios - If you used a property mgmt company vs. yourself (this may be a need in the future) - longer term - shorter term
- This should give you a very solid basis to understand your thoughts on the transaction, what options you have, and how you would address them.

From what you shared at a high level, it sounds like fees and expenses will eat up any potential cash profit so your gain will really result in the equity transfer.  Meaning, lets say you lost 2K/yr for 10 years, your gain on sale (at same valuation) would be 80K minus realtor fees.  Obviously not ideal as you would have had to come out of pocket 20k over this time period, invest your time/effort, etc, but net result is still a pretty positive number.   From your assessment above, you will need to determine what you are comfortable with and what you feel will likely happen.   The ideal scenario here is one where the condo profits quite a bit more annually and overall return will go up over time.

If your likely circumstances are one you would accept, I would focus on the terms and agreement with the FIL and be entirely business driven about the approach.  Meaning, telling your FIL what your analysis shows and what possible things you see happening in the future.   What you are willing to accept and what you are not.  It's not personal, its just a business discussion about the asset.  Indicating clearly (and in writing, if moving forward) that anytime this impacts the financials/time constraints of your family, you will sell the condo and he will no longer have access to it.    Ignoring the family aspects - if he gave it to you today and said you could sell it and keep the money, its a great deal.  Being willing to try and make the scenario work (if its one you can accept) for X years, selling it and you profit enough to cover your time invested, excellent.   But given the risks associated, I would completely have an agreed to relief valve (sale of the condo) that you have openly agreed to with FIL that you can execute.  The outcome of this discussion will determine if FIL is emotionally attached to protecting 'inheritance' (moving forward regardless of your relief valves and openly giving you full rights to sell) or if he is trying to do something else.  I would keep detailed records of everything related to business (good practice anyway), and this amount would be what I would openly talk with my wife about being the limit available to help her FIL if needed.   

The above (except the last sentence) is entirely about the business transaction and understanding how it could impact/benefit you in the future financially - not about the emotional family issues or impending FIL financial blow up which could change this entirely and is very much more difficult to measure/understand.  I will try and address my thoughts on that later as i have to run now.

It is likely my personality but I always start with what you can measure/understand first and then move on to emotional concerns as they tend to get very mixed up in these situations.   Hoping any of this is helpful for you in some way.
« Last Edit: January 15, 2018, 08:58:14 AM by StressExpress »