Author Topic: essentially buying house from parents - a few questions  (Read 1945 times)

zippy

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essentially buying house from parents - a few questions
« on: June 09, 2014, 02:29:40 PM »
A little background: My parents are retiring in 3-4 years and currently own two properties. They are planning on rebuilding one of their houses, and moving out of the other.

Our (me, my husband, and two kids) 4 year plan is to leave where we are now (renting in another state), and move into my parent's house. They are planning on quitclaiming the house to us, and we will pay for the rebuilding of their other house (we were originally going to just buy the house from them, but thought this might be a better option for everyone). According to my dad (he will be the general contractor), it should cost between 200-250k, and we would pay for it in cash.

So a few questions - 4 years from now is definitely not long term, but I'm not sure if I would consider it short term either. Should we invest that 200k, or should we keep it cash? Also, any advice from anyone who has been through the same process (quitclaim or buying from parents)? Or just generally knowledgeable about the process?

taekvideo

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Re: essentially buying house from parents - a few questions
« Reply #1 on: June 09, 2014, 05:33:46 PM »
Your expected return from stocks on $200k would be... about $100k.
Of course you could lose half of it, or earn $300k...


I personally wouldn't recommend leaving that much sitting in cash for 4 years... find something to do with it, even if it's lower returns (and safer) than stocks (not bonds though, since they're likely to crash within 4 years if interest rates rise).

Emg03063

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Re: essentially buying house from parents - a few questions
« Reply #2 on: June 10, 2014, 07:05:46 AM »
4 year cd?

zippy

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Re: essentially buying house from parents - a few questions
« Reply #3 on: June 10, 2014, 11:50:58 AM »
Thanks for the replies. I'll shop around in my area and online for rates of more stable options (CD, etc.), but I'm thinking I'll probably invest it. We have a good amount in an emergency fund so if the market is way down, we can at least pay for the start of the renovation with that, and take out only what we need to from our investments.

Anyone know much about quitclaim? We're planning on researching much more, obviously, but I thought I would see if anyone who has the same type of outlook on things had an opinion!

davisgang90

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Re: essentially buying house from parents - a few questions
« Reply #4 on: June 10, 2014, 05:00:31 PM »
You didn't ask and I am no expert on the tax liabilities/benefits of quit claim but this would make me nervous.  In your position, I'd rather buy the house from the parents and let them use the funds to refurbish their other house.

Too many opportunities for cost overruns and other hurt feelings.  You buying the house outright seems a much cleaner option.  Just my $.02.

gimp

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Re: essentially buying house from parents - a few questions
« Reply #5 on: June 10, 2014, 05:02:16 PM »
Agreed. Why the quitclaim? Saving on taxes/fees? It seems much more straightforward to just buy the house. Also renovation costs tend to balloon, and you don't want to be stuck holding the checkbook when it's half done and way over budget.

zippy

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Re: essentially buying house from parents - a few questions
« Reply #6 on: June 10, 2014, 06:37:45 PM »
Yeah, good points. We've already agreed that we will pay up to a certain amount, and if it goes over that, they will be responsible for the overage.