Author Topic: Gifted a house, what would you do?  (Read 2943 times)

centastic

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Gifted a house, what would you do?
« on: March 12, 2018, 05:29:22 AM »
About 12 years ago a friend of mine and his wife were gifted a house and a few acres by his parents' mother, when she finally moved into a nursing home.

The house and land was worth about 700K, and their combined net worth before receiving the house was a modest 200K. He was working, his wife was looking after the household. His salary was about 65K at the time.

The house and land was in the countryside, in an area that was... not exactly in decline but whose viability largely hinged on a few concentrated industries.

Furthermore, his suddenly-highly-concentrated portfolio came with a lot of baggage. People saying "how dare you! It's an historical homestead!" whenever he discussed selling the place for something more downscale or renting it out.

Anyway, he ended up selling the house in 2006, buying gold, then when Lehman Bros went bankrupt in 2008 he bought into the stock market and has since retired a multi millionaire.

Just kidding.

He is fine now, but he had a few years where it was quite dicey, and the property and his difficulty selling it caused a lot of his problems. I have been thinking about it a lot lately and how he could have done things differently, so I thought I'd open it up to the Mustachians and see if you have some opinions: what to do if you are gifted an illiquid, highly-concentrated asset that then takes up 80% of your portfolio?

bwall

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Re: Gifted a house, what would you do?
« Reply #1 on: March 12, 2018, 07:23:22 AM »
The first thing I would do is to say "Thank you!" and be happy that I now have a high quality problem and opportunity that most people will never have in their entire life.

Then, I'd go about solving that problem and taking advantage of the opportunity.

Seradoc

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Re: Gifted a house, what would you do?
« Reply #2 on: March 12, 2018, 07:24:56 AM »
If it isn't the house you would buy, it is the one you should sell.

Get out from under the asset you didn't elect to obtain on your own volition.  You can always buy something fairly equivalent later if you decide to go that way.

centastic

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Re: Gifted a house, what would you do?
« Reply #3 on: March 12, 2018, 06:30:23 PM »
The first thing I would do is to say "Thank you!" and be happy that I now have a high quality problem and opportunity that most people will never have in their entire life.

Then, I'd go about solving that problem and taking advantage of the opportunity.

Haha I know, it's one of those "problem's I'd love to have" but it really caused him and his wife a lot of stress. It's like a twist on the "janitor wins the lottery" story, where the money brings more problems than it solves.

I'm trying to think whether it would have been risky to have taken out a small loan against the property, or something else.

If it isn't the house you would buy, it is the one you should sell.

Get out from under the asset you didn't elect to obtain on your own volition.  You can always buy something fairly equivalent later if you decide to go that way.

A good way of thinking about it, indeed. It would have been really hard for him to have sold back then, especially considering the main source of demand was Chinese buyers.

bwall

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Re: Gifted a house, what would you do?
« Reply #4 on: March 12, 2018, 07:23:01 PM »
hmmm.... where are the Chinese buying houses in the countryside? I've never heard of that before. High priced new homes and condos in city centers, yes. But with a few acres and a 'historical homestead'? Not so sure.

centastic

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Re: Gifted a house, what would you do?
« Reply #5 on: March 14, 2018, 02:15:13 PM »
I'm assuming you aren't from Australia?

The house itself was nothing special but I've played down the rest of the property, which was several hundred acres of improved fertile land.

bwall

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Re: Gifted a house, what would you do?
« Reply #6 on: March 14, 2018, 05:18:10 PM »
Right. I'm in the USA. I've heard of Chinese property buyers' habits in Europe and North America. I know they are also buying in Australia and NZ, but I assumed they followed the same patterns as in the other countries. I guess not!

Anyways, congrats on your high quality problem!

centastic

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Re: Gifted a house, what would you do?
« Reply #7 on: March 15, 2018, 04:10:54 PM »
haha thanks. Not *my* problem, but a problem a friend had about 12 years ago.

ChpBstrd

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Re: Gifted a house, what would you do?
« Reply #8 on: March 15, 2018, 07:37:19 PM »
It's the same answer as if I inherited an unneeded car.

Sell it.

oldladystache

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Re: Gifted a house, what would you do?
« Reply #9 on: March 15, 2018, 07:44:55 PM »
I thought long and hard. My dad's house was a lot nicer than mine. But I like mine so I sold his.

aboatguy

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Re: Gifted a house, what would you do?
« Reply #10 on: March 16, 2018, 01:23:31 PM »


If it was like this one I'd be trying to figure out how to keep it!

VoteCthulu

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Re: Gifted a house, what would you do?
« Reply #11 on: March 16, 2018, 04:50:00 PM »
I would either sell it, or sell my current house and move into it.

centastic

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Re: Gifted a house, what would you do?
« Reply #12 on: March 17, 2018, 10:44:54 PM »
"Sell it" seems to be the consensus, which is the one option that wasn't really available to him.

Even with the benefit of hindsight I can't in good faith recommend he take out a loan against the house and buy stocks. My first instinct is "you need to diversify away from the area" but at least with a house you can live in it, regardless of the value.

One thing I forgot to mention was that most of the land was leased out. However because he didn't do any of the maintenence himself (fences, etc) and probably because his pricing was a bit low he barely broke even on this.

bwall

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Re: Gifted a house, what would you do?
« Reply #13 on: March 17, 2018, 11:30:16 PM »
Even with the benefit of hindsight I can't in good faith recommend he take out a loan against the house and buy stocks.

I would recommend falling in love with a stripper before I'd suggest taking out a loan to play the stock market. At least with a stripper you'd enjoy the screwing you're about to get.

Full disclosure: Heavily invested in the stock market, with zero debt.

Villanelle

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Re: Gifted a house, what would you do?
« Reply #14 on: March 18, 2018, 02:01:59 AM »
If it didn't make sense as a rental, I would sell.

And in almost any market, there is no such thing as selling "not really an available option".  It was all found money, essentially.  If no one would buy it for $700k, then guess what?  It wasn't a $700k property.  But likely *someone* would have paid $600k or $550k.  And he would now have had that $600k working in the stock market for 12 years.  Instead, he still has a property he doesn't want and likely will still have to sell for $600k eventually.  Drop the price to a super low number, then reduce by another 5%, and list at that price. 

appleshampooid

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Re: Gifted a house, what would you do?
« Reply #15 on: March 19, 2018, 12:06:16 PM »
If it didn't make sense as a rental, I would sell.

And in almost any market, there is no such thing as selling "not really an available option".  It was all found money, essentially.  If no one would buy it for $700k, then guess what?  It wasn't a $700k property.  But likely *someone* would have paid $600k or $550k.  And he would now have had that $600k working in the stock market for 12 years.  Instead, he still has a property he doesn't want and likely will still have to sell for $600k eventually.  Drop the price to a super low number, then reduce by another 5%, and list at that price.
I think he meant it wasn't on available option due to family and community pressure, not because of the price point.

Seradoc

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Re: Gifted a house, what would you do?
« Reply #16 on: March 19, 2018, 12:24:34 PM »
If the family or community cares so much, they can buy it.  Putting that onto the inheritor is unfair.

Villanelle

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Re: Gifted a house, what would you do?
« Reply #17 on: March 19, 2018, 08:55:49 PM »
If it didn't make sense as a rental, I would sell.

And in almost any market, there is no such thing as selling "not really an available option".  It was all found money, essentially.  If no one would buy it for $700k, then guess what?  It wasn't a $700k property.  But likely *someone* would have paid $600k or $550k.  And he would now have had that $600k working in the stock market for 12 years.  Instead, he still has a property he doesn't want and likely will still have to sell for $600k eventually.  Drop the price to a super low number, then reduce by another 5%, and list at that price.
I think he meant it wasn't on available option due to family and community pressure, not because of the price point.

If it was a reference to pressure, then the same answer applies.  It absolutley was an option.  He doesn't own anyone an explanation, but if he wants to offer one, one time, then,"I simply can't afford to pay the expenses on a property I'm not using.  I'd be thrilled if someone else in the community or family wants to buy it, but it's a money pit for me, no matter how great a house and how storied the history, so I have to sell it.  I will wait 60 days, during which I only accept offers from community and family, and then I'll be listing it."

appleshampooid

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Re: Gifted a house, what would you do?
« Reply #18 on: March 20, 2018, 01:08:45 PM »
If the family or community cares so much, they can buy it.  Putting that onto the inheritor is unfair.
If it didn't make sense as a rental, I would sell.

And in almost any market, there is no such thing as selling "not really an available option".  It was all found money, essentially.  If no one would buy it for $700k, then guess what?  It wasn't a $700k property.  But likely *someone* would have paid $600k or $550k.  And he would now have had that $600k working in the stock market for 12 years.  Instead, he still has a property he doesn't want and likely will still have to sell for $600k eventually.  Drop the price to a super low number, then reduce by another 5%, and list at that price.
I think he meant it wasn't on available option due to family and community pressure, not because of the price point.

If it was a reference to pressure, then the same answer applies.  It absolutley was an option.  He doesn't own anyone an explanation, but if he wants to offer one, one time, then,"I simply can't afford to pay the expenses on a property I'm not using.  I'd be thrilled if someone else in the community or family wants to buy it, but it's a money pit for me, no matter how great a house and how storied the history, so I have to sell it.  I will wait 60 days, during which I only accept offers from community and family, and then I'll be listing it."
I agree with both of you but clearly the OP's friend didn't. I was merely trying to shed some light that it wasn't the potential purchase price that was "preventing" the selling.

centastic

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Re: Gifted a house, what would you do?
« Reply #19 on: March 20, 2018, 02:15:47 PM »
Thank you. Yes, the pressure came from the community and everyone else who he had to deal with on a daily basis. Unfortuantely this was not the city, where you can sell and pretty much remain anonymous.

Good point about asking the community to purchase it. I think this would have caused more problems than it solved because no-one likes to be called out like this but I guess he could have dealt with the fallout.

I know he considered cutting it up and selling off just the grazing land but essentially the same person would have had to have bought the whole lot because of the access rights. I honestly can't remember the details.

Regardless, assuming he simply couldn't sell, are there any ways he could have improved the situation? Diversifying his fortunates away from the community by purchasing a global ETF would be the obvious solution, but would it have been enough to have made a difference? As a percentage of his total wealth, and considering his income, the house and land was massively oversized.

appleshampooid

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Re: Gifted a house, what would you do?
« Reply #20 on: March 20, 2018, 02:25:11 PM »
Thank you. Yes, the pressure came from the community and everyone else who he had to deal with on a daily basis. Unfortuantely this was not the city, where you can sell and pretty much remain anonymous.

Good point about asking the community to purchase it. I think this would have caused more problems than it solved because no-one likes to be called out like this but I guess he could have dealt with the fallout.

I know he considered cutting it up and selling off just the grazing land but essentially the same person would have had to have bought the whole lot because of the access rights. I honestly can't remember the details.

Regardless, assuming he simply couldn't sell, are there any ways he could have improved the situation? Diversifying his fortunates away from the community by purchasing a global ETF would be the obvious solution, but would it have been enough to have made a difference? As a percentage of his total wealth, and considering his income, the house and land was massively oversized.
The problem is that you're removing the option that makes the MOST sense. Given their net worth and income, the ONLY sane option was to sell the property. If that wasn't possible, then any other suggestion is a very distant second. Maybe he could have rented it out, but it sounds like a property not super easy to rent out at a reasonable rate.