Renting from father in law?

[Frugalman19]

Hello all,

The wife and I have an opportunity to possibly rent her father in laws house from him. But need some advice.

Background, wife's mother and new husband just purchased a new home out of state, but do not want to sell his home here in our town. They have offered for us to rent out this house from them, with the stipulation that they can come back at any time and stay with us and leave his 39 foot motor home at any time.

My issue, we are saving for a house ourself and are living in a one bedroom apartment, very low cost for the area, only 1 mile from work. Our utilities with Internet is about $120 a month and our total cost for the month is about $1250.

If he were to rent the house out he would easily get $2,200 for it. They offered to charge us whatever we are paying now, but that would $1130 for rent. To most that would be a great deal, but to a mustachian, I look at distance from work has just jumped to 11 miles one way, and now we would be paying for utilities of a house, which I expect will be closer to $250+ with Internet and low cost cable (he would want cable for when they come into town). So my costs with the travel to work would be roughly $350 more per month.

My proposal, I told him we would cover all of the costs associated with the home, hoa, property tax, insurance, utilities etc which would come out to $850 per month because our main goal is to save money to pay off student debt and save for a home.

Am I off base here? Is there something I'm over looking? I look at it like we are renting out a room from the house not the whole house, because they can come and go as they please. Which means potentially living with my in laws for weeks at a time. I think making it cost free for him to keep the house here with free reign to come and go as he pleases is a good deal for both parties.

What are your thoughts?

[dandarc]

I'd just say no thanks.  Even though it is a great deal for that house, it doesn't sound like a great deal for you.

[AlwaysLearningToSave]

. . . with the stipulation that they can come back at any time and stay with us . . . .

That's a big stipulation, not even mentioning the increased cost to you.  Only you can accurately assess how much of an imposition this might be but I suspect this arrangement could sour very easily. 

How good is your wife's relationship with her mom?  Has MIL's new husband been around long enough to know how he will affect the dynamic of the relationship?  Have you been married long enough to know how your relationship will affect your wife's relationship with her mother? 

I might be willing to suffer potentially strained relationships if there were a significant financial benefit and I could quickly bail if the arrangement went south.  But when there is no significant financial benefit, why do it?

How about you offer to be step FIL's paid property manager if he rents it to someone else?  He gets better rent, you get a small paid side gig, and it seems less likely to devolve into a mess of blurred boundaries and resentment.  Just trying to think outside the box. 

[With This Herring]

I would advise against it, even if all intentions are in the right place.  DBF's brother and his wife "rented" a house from DBF/brother's mother and her husband for around a year when mother and husband left to live in another state.  There was either no direct rent paid, or it was a minimal amount, even for the LCOL area.  Brother and wife paid for utilities.

Wife had originally wanted a written agreement of how this whole rental thing would work, but mother dismissed the idea, and nothing was done with it.  A number of issues came up quickly.  Mother and husband came back to stay as they chose.  The house had major structural issues, which caused it to become less livable for brother and (especially) wife.  Wife felt like they could not treat the place as a real home, for all the reasons mentioned, and things became unpleasant.

Eventually, brother and wife found new jobs and moved hours away, and mother had hurt feelings that now the house wouldn't be maintained.

All four people (brother & wife, mother & husband) are good people, but this sort of arrangement leads too easily to hurt feelings.  DBF and I were really, really glad that we were not a part of this.  Even with things in writing, there would have been an expectation at some point to let something slide "because we're family."

[robartsd]

I'd second the idea that you explain that the house is not a good fit for you right now, but that you'd be willing to help out as a paid property manager if they trully don't want to sell it. Point out that the money they make from rent should be able to cover motorhome storage and costs for their accomidations when they do come to visit you.

[Frugalman19]

Thanks all for your thoughts!

I will add that the house is in the neighborhood we were looking to buy in. The location is perfect for us.
The real issue is if we would be able to save $300-400 a month while staying there

[robartsd]

Thanks all for your thoughts!

I will add that the house is in the neighborhood we were looking to buy in. The location is perfect for us.
The real issue is if we would be able to save $300-400 a month while staying there

You should outline your reasons why you would rather stay where you are. If it really is just financial, perhaps your FIL will choose to make it work for you finanicially. I'd sill bring up the idea of you managing the property for him while renting it out on the market (this would probably make the most financialsense for both of you right now). If the location is right for you later, is the house also right and what would FIL do with the house if you were in your own - a transfer within the family could avoid some costs vs. him selling and you buying on the market. Of course you also have to consider the personal strings attached to any deal - depending on your relationship, arms length transactions might make a lot more sense for optimizing lifetime happiness.