Author Topic: Need advice: trying to keep family house  (Read 985 times)

Captain Cactus

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Need advice: trying to keep family house
« on: January 22, 2018, 07:14:44 PM »
My grandmother just passed away unexpectedly and I'm trying to come up with some options for buying her house to keep in the family.  My mother inherited the cash along with some cash since she is the only living child.  House is probably worth $300,000 in its current state (outdated everything).  It has a dirt floor, fieldstone foundation below ground and brick foundation above ground.  In a few sections the foundation is crumbling and the brick part is bowing out, so with that issue the value is probably reduced because it's going to need to be addressed eventually.  All this being said, its in a really nice small  town in New England and there is a lot of Boston money coming in and making the town nice and the real estate values go up.  Best lawn/back yard in the neighborhood.

I want to keep the house for a few reasons.  Given the market I believe there will be solid long term appreciation.  Excellent schools.  Most of all, however, I want to keep it myself even though I won't be living in it.  I live about 2 1/2 hours away.  Maybe we'll retire there some day (20 years). 

I am writing to get suggestions for how to make this possible.  My mother sees selling the house as a big part of her retirement plan but she isn't retiring for about 5 more years.  She is open to selling it to me.  If I buy it outright and make necessary repairs I don't believe the market rent would make sense given Total purchase price plus repairs and renovations.  if I buy and repair I could likely get a decent return if I sold it but then I lose the house.  There has to be other ways I can get the house and my mother gets her retirement money. 

Let's get creative...how can I make this happen?

lizzzi

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Re: Need advice: trying to keep family house
« Reply #1 on: January 23, 2018, 06:20:01 AM »
It's still early and I'm not totally awake, but just on the face of it, I think if you want the house but your mother will need the money out of it...I think you need to purchase it from your mother.

waltworks

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Re: Need advice: trying to keep family house
« Reply #2 on: January 23, 2018, 09:26:01 AM »
So, the house is worth $X. Your mom wants to use that $X to fund her retirement. You want to use part of that $X for whatever you want to use money for.

I may be missing something here, but there is no way to divide up the house and end up with more than $X to share (and it's your mom's house, not yours). Let your mom sell the house and retire, and go make money off of people who didn't give birth to you.

-W

ixtap

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Re: Need advice: trying to keep family house
« Reply #3 on: January 23, 2018, 09:47:23 AM »
Sell the house, invest any money you would have spent on it well, and perhaps it will be on the market again in 20 years.

Captain Cactus

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Re: Need advice: trying to keep family house
« Reply #4 on: January 23, 2018, 12:52:07 PM »
OP here.  I feel like something was lost in translation here.  I am not looking to take advantage of my mother.  She will be holding onto the house for at least the next 6-12 months until things have settled down and she is in the right frame of mind.  Long term, however, she will not be keeping it and when she sells it it will go for market value for the condition that it is in.

Perhaps this is a better question for the BP forum.  My question isn't how I can make this a better investment vs VTSAX.  Bottom line, I want the house because I want to keep it in my family and I think it'll be a solid long term investment.  Some ideas I'm thinking about include renting it, short term rents/corporate or transitional housing for professionals new to town (hospital and private school in town), or possibly vacation rental (air bnb, vrbo, etc...).

By posting here I'm hoping to explore ways I can achieve my goals while also making good financial sense to my mother.  Im open to a business partnership of sorts.  Possibly become partners with my mother in the sense that her contribution to our business would be the house in its current state, my contribution would be cash to make all necessary structural and cosmetic improvements and enhance its value...rent and over time buy out my mother's stake in the business at a rate that makes it worth her while.

Would love to hear brainstorms beyond "invest in VTSAX"...I already do that and am in a position to diversify.  Thank you!

lizzzi

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Re: Need advice: trying to keep family house
« Reply #5 on: January 23, 2018, 01:08:48 PM »
What am I not seeing? Perhaps your mother would like to rent it out...that might be helpful in funding her old age...but it is Her house. I don't understand where you are seeing yourself having an interest in it. It sounds emotionally nice to keep it in the family, but if that isn't the way your mother is thinking--oh well, too bad, bye-bye house. You could take some nice keepsake photos that the family could display after it is sold.   She has every right to sell it--it belongs to her. Your ideas would sound OK if it were your own house...or if you bought your mother out and then decided you wanted to rent it or whatever. I think it would be a great thing for you if you had that house...but you don't.

But maybe I'm missing something here.

Captain Cactus

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Re: Need advice: trying to keep family house
« Reply #6 on: January 23, 2018, 01:20:49 PM »
Thanks all for your insight.  I guess this isn't the right forum to ask.  Clearly I'm coming across sounding like a creep. 

My mother doesn't want to rent it but is open to me doing something with the house.  She is very supportive.  I'm just looking for ideas, brainstorming, because I figured somebody in the real estate forum would have some ideas beyond "just sell it". 

I appreciate your candor though, thanks.

Lmoot

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Re: Need advice: trying to keep family house
« Reply #7 on: January 23, 2018, 03:51:46 PM »
 I get what you are saying. Is there a way your mom would be open to letting you handle renting out the house, and giving her the rental income to add towards retirement? If you can show her that it can be profitable, you might be able to stall while you save up the money to buy it from her.  You would be like the acting property manager. Otherwise, it may not be worth it to keep. Houses cost a lot of money whether someone is living in them or not. And it sounds like there are already some potential maintenance needs. 

Getting the money now and investing it towards her retirement, would work out better for her, than waiting to sell it. Thereís no way you would be able to make up the time loss. It sounds like she is willing to sacrifice that time to give you a chance, but I would honestly question your motivation for keeping this house, and how committed you are. It sounds like your emotions may be a little heightened Because of the passing of your grandmother. Find out what the costs are to maintain the house, what the cost would be to repair it, and what the cost would be to fix it to the point that it qualifies for landlords insurance. If those things donít scare you off, then perhaps itís something worth pursuing. But while keeping it in the family may sound nice and make you warm and fuzzy, your mom might be seeing a more realistic side of it.

 You say you want to keep it in the family, but then at the same time you say you expect it to be an investment because of the value. This would mean eventually selling it, therefore not keeping in the family. And if you want to keep it for sentimental reasons because it reminds you of your grandmother, will those feelings change with strangers living in there, such as renters? Do you personally have a hope of living in the house? What you want to do would make more sense, if you had the intention of living in the house. And I donít believe you mentioned that in your comment, though I may have missed it.

I get where you are coming from I think. My grandmother is still alive, and I have an attachment to her house since I grew up in it. And while I love the house, and my grandfather did a lot of work on it himself, I couldnít see myself living in the house or the area.  I am a perspective property investor, and already own one rental property that was my former residence, so I definitely played with the idea of swooping in and buying it myself, but when I really thought about it, turning it into an investment property would alter my feelings about the property, and it wouldnít adequately feed that desire to be connected to the past and to my grandmother. In a way, it actually might change that connection. I am mentally preparing myself to be OK with my father and aunt selling it when itís time.

 My grandmother has a painting of the house she grew up in, and she refers to it often. I would definitely consider doing something like that, to keep the house, how you would like to remember it. My grandmother worked her whole life on her beautiful gardens, and I fully intend on having a professional photographer take photos of the house and the garden, And Iíd like to do it while she is still alive so she can see them, and be in them.

There are many ways, and much less expensive ways, to maintain that connection after a loved one has passed. I donít know if this is all sentimental for you, since you are coming at it from an investment point of view, but at the same time I sort of sense that youíre using the hope that it would be a good investment, as an excuse to hold on.
« Last Edit: January 23, 2018, 03:58:27 PM by Lmoot »

former player

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Re: Need advice: trying to keep family house
« Reply #8 on: January 23, 2018, 04:18:20 PM »
I understand the urge to keep the house.  My grandparent's house was small, beautiful and had protected historic status.  My aunt, who inherited, offered to leave it to me if I would commit to living in it and keeping it in the family.  I had to tell her I couldn't do that: it was 2 hours away from where I lived and worked and even further away from where I wanted to live in retirement.  When my aunt died the house was sold and the proceeds split between the family: I got some of it but not nearly what I would have done if I'd said yes to my aunt's wishes.  It is now lived in by a young family who have done some sensitive updates: I think that's the best result for me, them and the house.

I can't see that it would work for you to keep an old house in need of structural repairs and serious amounts of gardening work (please note: you are very unlikely to get 20 years' worth of tenants who will want and be able to look after that wonderful garden to the standards required) when you live so far away.  I think that if keeping the house is a priority for you, you should consider moving into it and making it your main home.  If you did that, you would be able to pay your mother fair value and would be on the spot to deal with the maintenance and structural issues.   

I realise that moving in yourself would probably require a complete life change.  If it's not possible for you to make the house your main home I personally think the practicalities are against keeping it.  And this forum will also tell you what you already know, that the finances of buying it and renting it out do not make sense on a purely monetary calculation.  What you need to work out is how much it will probably cost you to buy the house, renovate it and rent it out over the next 20 years, and then decide whether that cost is worth it to you (and to anyone whose finances are tied up with yours).   If you do decide the cost is worth it to you, then by all means do it.  But I don't think you should put any of that cost, either in time or money, on your mother, who has the right to make the choices which are best for her.

lizzzi

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Re: Need advice: trying to keep family house
« Reply #9 on: January 23, 2018, 04:34:08 PM »
Ditto to former player and Lmoot. And OP, sorry if it sounded like I thought you were a creep. I didn't think that at all. You are obviously family-minded and of a practical turn of mind.  Nothing wrong with asking questions, and I hope I didn't come across as the wicked witch of the west.

I'm another one who has seen a couple of lovely, historic homes sold out of the family--my grandma's Civil War era house, where I was brought home  from the hospital to when I was born and lived for any number of years, and my parent's lovely Edwardian--stained glass windows, gorgeous woodwork, etc.-- around the corner, where we lived as an extended family for 40 years. When all the elders died off, the family was scattered all over the country, and nobody had any need or wish to live and work in the old (quaint, charming, historic) neighborhood. Both houses ended up with people who appreciated them, and I have to say have probably done more for those homes in terms of sensitive, sensible upkeep and decoration than family members would have done.

Do take pictures, whatever else you decide to do. You will be surprised over the years how much they mean to you and your kids.

lizzzi

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Re: Need advice: trying to keep family house
« Reply #10 on: January 23, 2018, 04:38:00 PM »
Forgot to say that none of us wanted to be long distance landlords with the idea that we would move back to the old neighborhood in retirement. It just seemed like way too much of a headache.

waltworks

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Re: Need advice: trying to keep family house
« Reply #11 on: January 23, 2018, 05:42:46 PM »
Ok, if it means that much to you - buy the house from her. Pretty simple.

Involving her in whatever scheme you come up with to make it an investment is a bad idea, like most ideas involving family/risk/money. Don't do it.

-W

Lmoot

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Re: Need advice: trying to keep family house
« Reply #12 on: January 24, 2018, 01:24:57 AM »
Also, would you want to live in/ retire or buy this house if you didnít have an emotional connection? We have to be careful to not let the past hold us hostage, and make us do things that may not be in our interest all for the sake of sentimentality. $300k plus cost of repairs is a lot to hang onto something that you may or may not get use from, 20 years from now, and which youíve already determined wouldnít be a good rental investment.

 I say let it go. Let your mom get her money, and if it really means that much to you, if it comes back on sale again you can entertain buying it. Who knows. Maybe itíll go into foreclosure, people nowadays donít stay in houses long so maybe they will fix up the problems and resell it, maybe the market will take a dive. There are too many maybes to compromise your momĎs retirement goals, and your financial future. You canít both eat a sandwich and save it for later.

If you really want this house for the future and see it as a possible investment, then you will just have to buy it, rent it out, and eat the cost that renting doesnít pay off. If you truly see it as an investment, then you will need to be willing to operate at a loss until you can recoup that investment.

coopdog

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Re: Need advice: trying to keep family house
« Reply #13 on: January 24, 2018, 05:48:29 AM »
If you fix it up but can't bring yourself to sell it and it's not a good buy and hold, then it's a bad investment. It's that simple. There's no magic formula here unless you give less than fair market value for it.

There's obviously some sentimental attachment. That's understandable. But recognize it for what it is.




Car Jack

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Re: Need advice: trying to keep family house
« Reply #14 on: January 24, 2018, 11:03:07 AM »
Perhaps get some realistic quotes on what it would take to bring the house up to a good standard.  Hearing about the foundation, it seems like this might involve lifting the house up, excavating under it, and building footings and a real foundation.  Wild ass guess....$150k.  Now you have an old, beat house on an excellent foundation.  House updates and fixes and maintenance, I certainly can see bills adding up with bathroom and kitchen makeovers to hit another $100k.  So now what's the realistic value of the house.  Thinking that Boston money will "up" the local prices is speculating.  Maybe we get another 1991 where New England real estate tanked.  So you pay $300k for the house, you put $250k in it to fix it up and then air B and B it to bring in $10k a year.  That's a huge "nope".

Do your homework but I think you need to consider just letting it go.

Rich on Money

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Re: Need advice: trying to keep family house
« Reply #15 on: January 25, 2018, 04:55:37 AM »
I know this isn't the answer you are looking for, but you don't want to risk your Mom's retirement money.  You buy it from her, and get her the retirement money she needs.  That frees you up to take your chances on this house.  She shouldn't be your partner on this deal, that  just puts her retirement at risk.


Captain Cactus

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Re: Need advice: trying to keep family house
« Reply #16 on: January 25, 2018, 11:44:25 AM »
Thank you all for this candid advice.  Obviously these types of things are hard, and obviously there is a degree of emotion factoring in.  I think you are right about your assessment.  She will likely get some quotes for the big projects simply to see what it would take to get house in nicer condition before putting on market. 

You always think there will be more time with those you love. 

We are not our material possessions. 

rothnroll

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Re: Need advice: trying to keep family house
« Reply #17 on: January 25, 2018, 11:51:44 AM »
The smart thing would be to not get involved. With the amount of upkeep and property taxes spent on the house, you could retire earlier.
I understand you loved your grandmother, but don't let emotion ruin your finances.

ysette9

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Re: Need advice: trying to keep family house
« Reply #18 on: January 25, 2018, 12:36:48 PM »
This isn't the same scale at all as your situation, but when my grandfather died, I was talked into buying his car from my grandmother at a below-market rate. There was a lot of the same emotional connections and sentimentality at play that I read in your posts. Granted, it was just a car so the stakes were lower, but over time I regretted being talked into that purchase. The car wasn't right for me; too big, not comfortable for my small frame to drive. I ended up selling it later and getting something better suited to me.

What I should have done is gone with my logical brain instead of my emotional brain and just passed on the car all together. Yes, it's sad to see it leave the family, but it is just an object. There are other cars and other houses out there. Personally I feel memories and photos are more important.