Author Topic: Seeking Advice about Landlording by Inheritance and other sundries  (Read 126 times)

Beijaflor

  • 5 O'Clock Shadow
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  • Location: Near the Forests
Hello everyone!  I've been a lurker since early 2017, but this is my first post.  I have loved MMM since I found it.  I am always reading about $ and this site has absorbed most of my free reading time over these past months.  I think what I love so much is it not only gives good nuts and bolts financial info, but how people have used that info and experience from others in complex life situations.

Spoiler:  This is loooong and complex.  I don't blame you for not reading it all and commenting.  Thank you immensely to those whose thoughtful responses I anticipate.

Background:  I was a conserv/guard for a relative for about a decade.  There were no children, so my siblings and I were treated as their own.  This relative passed about 3 yrs ago, so the three of us inherited the assets.  I have handled almost everything by myself over these past 13 yrs. (including those dang*&! conservatorship reports balanced to the penny!  I don't curse -- but those reports deserve to have choice words beside them.)  My siblings would help with a few small tasks when asked, but offering was rare.  This person had alienated many relatives by poor behavior, so it is difficult to blame them for not voluntarily signing up for further abuse/alienation.  Moral to the story:  the siblings trust my judgement and agree, in general, to whatever I deem is best.

We rented the home for a few years before the passing and still have the same renter (about 6 yrs now), who says he would love to live there for another 10 yrs!  This renter has been extremely good.  He paints the interior of the house almost every year and keeps up with small maintenance items without asking. I had not been in the house for a couple years (right after the death -- I know -- bad, bad, bad) and was impressed by how well kept the house looked. 

Important details:  Pd off house with some of the inherited investments after death, HCOL area, House is in our 3 names, not an LLC (question for another day), 1200 sq foot rambler built in 1956, COMPLETELY redone about 8 yrs ago down to the studs due to serious water damage (only thing not replaced was roof and furnace.) Everything else was brand spanking new; hence we do not currently have a lot of maintenance costs, although I know in the long term we will have to replace carpeting, upgrade kitchen, etc. We keep 10K in a balanced investment for emergency repair funds. 

Question:  It is difficult to look at ROI calculators since we have not invested any personal $.  They always give astronomical returns!  I assume we would really have to use the value of the home as the initial investment.  I would think selling it and investing the proceeds (325K) in index funds might in the long run be better.  However, how do I really calculate this?  We are nowhere near a 1% rule due to HCOL area.  It is rented at about 10% BMV, but we love these renters.  (I expect a severe face punch for subsidizing someone else's living).  We got the stepped up basis, so if we were to turn around and sell it in the next few years, the cap gains and depreciation would not kill us.

Twist:  We are all plus/minus a few years of 50.  This inheritance, although not insignificant, was a small portion of DH and my NW.  However, it was WAY, WAY more than the NW of either of my siblings. This was a true windfall for them. Neither has any retirement funds nor pensions. Sibling B is very responsible and has always worked, just not at high paying jobs, is pretty good with $ and takes care of own.  Sibling A, however, always has problems with $ and declared bankruptcy once.  I truly think at times they try, but just can't seem to figure out the rules of $. 

I have kept the house partially due to not wanting to make any serious decisions during grief periods.  But also, I know if I sell it and give SIB A access to 110K, it will be gone in a few yrs with nothing to show for it and when they need to retire, there will truly be no funds except SS.  I already took the time to help SIB A sit down with a financial advisor to set up the Beneficial IRA (we all received) and explain that one could put the RMD's into a ROTH IRA each yr, thereby stretching the $ and the amts were small, so the taxes each yr would not kill even them.  I had high hopes this would really stick after all my effort.  I was devastated to find out the funds didn't last even 6 mos. (I was not a fool, but was hoping for at least 2 yrs.)  They had been liquidated for "living expenses," not "frivolous things" (are you flipping kidding me?  It's all those previous frivolous expenditures/thought patterns that have led you to this point -- but I digress).  This experience solidified my reasoning for retaining the hard asset.  If I just distribute the 5K of rent to each every year, it isn't enough to change anybody's life, but it could keep food on the table.  I know some will say just cut loose, but I would not be able to bear seeing SIB A suffer greatly during retirement. 

I have thought about leveraging the equity and purchasing another rental, but am a little concerned to do so and have no idea how to really venture into Active Landlording as opposed to Inheritance Landlording!  We have had such good luck with our renter, I know it is not like that usually. In our personal financial lives, I would consider our investing style/comfort as more aggressive.  But this is another whole level of risk that I'm not really sure about.

I welcome anyone's thoughts/ideas on their similar experiences, how to calculate the real return, whether I'm crazy and just analyzing too much or how to better handle the overall situation.