Buy my Mom a house?

[Beckyemerson]

My husband's mom sold her house to downsize to another. Right before signing a loan for the new one she lost her job and doesn't qualify for a loan. She is willing to have the house title in our name if we pay for half. She would pay for her half with the money she made selling her previous house. Some information that might help judge if this is a good investment or not.

-My husband is her only child so one day when she dies everything she owns will go to him anyway. On the flip side she is the only person who might be willing to help her out.
-She is a meticulous caretaker of her property. She keeps her house and yard spick and span and maintains everything to last as long as possible.
-While she does a poor job of saving her money, she also never goes into debt.
-If she didn't have a house payment she could work part time or maybe even not at all.

[t-rymz]

An excellent question! Do you mind if I refer you a man far older and wiser than myself: the legendary jlcollinsnh?

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

The short answer: no.

[mozar]

Is there a reason she can't rent until she finds a new job?

[SwordGuy]

Somewhat different situation.  In this instance, mom is buying 1/2 a house for you and taking free rent in exchange.

As long as you agree on repair costs, sounds like a good way to help her out.

[DarinC]

An excellent question! Do you mind if I refer you a man far older and wiser than myself: the legendary jlcollinsnh?

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

The short answer: no.

The problem in that post was the association, not buying their mom a house. $5000-$6000 one or two times a year would literally pay for my mom's entire mortgage/home insurance.

I say go for it, but get everything in writing. And I say everything, I mean everything. This isn't to give you something that's legally enforceable, but instead to hammer out every last detail so your both eye-to-eye and also have something to reference later on. I gave my mom $55k to buy a house and it's appreciated by ~50% based on sales prices in the area.

[SDREMNGR]

People are missing out on the fact that it's in HIS name, not the Mom's. Heck, I'd suggest that the MOM get everything in writing so that she doesn't get evicted!  I don't think the OP is the type but elderly abuse and kids taking parents to the cleaners before their death is not uncommon.

In answer to the question,  I think it's a good tradeoff in general, and not only financial.  You are getting a house half paid for in return for no cashflow but all of the appreciation at her death.

I'm assuming that she will pay for tax and insurance? Or will you be?

In the end, not all calculations are financial.

[lakemom]

My husband's mom sold her house to downsize to another. Right before signing a loan for the new one she lost her job and doesn't qualify for a loan. She is willing to have the house title in our name if we pay for half. She would pay for her half with the money she made selling her previous house. Some information that might help judge if this is a good investment or not.

-My husband is her only child so one day when she dies everything she owns will go to him anyway. On the flip side she is the only person who might be willing to help her out.
-She is a meticulous caretaker of her property. She keeps her house and yard spick and span and maintains everything to last as long as possible.
-While she does a poor job of saving her money, she also never goes into debt.
-If she didn't have a house payment she could work part time or maybe even not at all.

Can you cover your half in cash (no mortgage)?  If that's the case then just put both names on the title (yours and hers) and save her the cost of any mortgage payment.  Think of it more in terms of a long term investment than just "helping Mom out".

[eccdogg]

We did something different but similar for my MIL. 

My wife and I both work and are paid pretty well 100K+ before bonuses which can be sizable.  When we were first married we planned on my wife staying home to watch kids, but the money from her job was just too good and she loved her career.  So we switched plans to getting a nanny (I know very unmustachian but the way we looked at it if the choice was for my wife to work or not we came out positive).

At the same time my MIL was working at a low paying job that paid equal to or less than what we would pay a nanny and had zero savings.  Since my wife is pretty much the only responsible one in her family I figured long term we were probably on the hook one way or the other.

Soooo we proposed that we would buy a house for MIL and she could live there rent free in exchange for her watching our kids, we also paid her a small salary.  We own the house in our name.  One advantage is there is a tax arbitrage.  Our marginal rate is like 30% and hers is next to nothing so the interest deduction is a much bigger deal to us.  For tax purposes her living there rent free counts as a gift but is under the 20K or whatever it is tax free gift allowance per year. When the kids get old enough for school she will be eligible for SS/Medicare and she can go to half time for us and we will stop paying cash but she can live in the house in exchange for after school care.

It has worked out pretty well, except that we are pretty locked in to the arrangement.  It definitely cuts down on liquidity of that capital because you essentially can never touch that investment.

[hybrid]

We did something a different but similar for my MIL. 

My wife and I both work and are paid pretty well 100K+ before bonuses which can be sizable.  When we were first married we planned on my wife staying home to watch kids, but the money from her job was just too good and she loved her career.  So we switched plans to getting a nanny (I know very unmustachian but the way we looked at it if the choice was for my wife to work or not we came out positive).

At the same time my MIL was working at a low paying job that paid equal to or less than what we would pay a nanny and had zero savings.  Since my wife is pretty much the only responsible one in her family I figured long term we were probably on the hook one way or the other.

Soooo we proposed that we would buy a house for MIL and she could live there rent free in exchange for her watching our kids, we also payed her a small salary.  We own the house in our name.  One advantage is there is a tax arbitrage.  Our marginal rate is like 30% and hers is next to nothing so the interest deduction is a much bigger deal to us.  For tax purposes her living there rent free counts as a gift but is under the 20K or whatever it is tax free gift allowance per year. When the kids get old enough for school she will be eligible for SS/Medicare and she can go to half time for us and we will stop paying cash but she can live in the house in exchange for after school care.

It has worked out pretty well, except that we are pretty locked in to the arrangement.  It definitely cuts down on liquidity of that capital because you essentially can never touch that investment.

Thanks for sharing, good info there.

[hybrid]

I find myself in the same boat with my mid-80s MIL. She lives in FL with my BIL and has decided she no longer likes it there for several legitimate reasons but her finances are a wreck. She retired too early and gets by on SS and a small pension, and by get by I mean there is precious little to spare at the end of the month. The reality is we help support her a bit indirectly now and see that obligation increasing over time.

To head that off we are considering purchasing an inexpensive townhouse in the same complex where we own our other rental. We figure for about 75K we can get her into a 1200 SF unit, which would be a pleasant upgrade from what she is living in now. We would then charge her rent, but far less than what normal rents go for and within her limited budget. We simply cannot gift her a 75K home. We were already considering a second rental property to begin with and the community association is well-funded, of course buying a second unit there doubles our exposure should there ever be an assessment.

We are kicking the tires on this idea and any decisions are months out, so this thread is timely.

[Rural]

Posting mostly to bookmark. We may have something similar to look at with my FIL.

[frugaliknowit]

My $.02:  No.  I would not do it.  Too many likely and potential downsides. 

[dcheesi]

What are the tax implications of taking her money to buy a house in your name? Sounds like a rather large "gift" on paper (but IANATaxGuru).