Rental/home Purchase Help - Emotionally charged

[Shzasaver2]

Hi All,
 OK, I hope this is the place to ask this question since we are in an emotionally charged state in regards to this purchase so really need unbiased opinions.
Here goes:
My husbands family home is available for us to purchase (it has been our dream to live there in retirement). The home is in Marin county,  however, the entire house needs to be gutted (electrical, kitchen, baths, pool resurfaced, heating, etc) and rebuilt.  We live out of state (upstate NY) and the rental income will just cover the 30yr mortgage, taxes, property management, pool service and garbage expenses on the home.  Addtitionally, other siblings believe the house is a gem and will sell for top dollar so unwilling to negotiate on price with us. We would be living on the 'edge of one bad tenant away from digging into our savings to cover mortgage/tax expenses'. I know this is so anti-mustachian and so emotional.  Please help!

We have 1/3 stake in the house and would receive that money tax free if the house sold. 
This is enough money to purchase 3-4 rentals where we live now with a return of 30-40% after all expenses(not including tax deductions) from each rental.

I have run the financial scenario and cannot financially justify buying the house.  We are really about 5-7years form retirement if we do not buy this home. If we do, we will owe a huge mortgage (260K before rebuilding the home) that we may or may not be able to pay off before we retire.  Well, we would  sell out current home and then we still would not be able to pay it off with the proceeds from this house. Additionally, we could retire right now if we did not purchase this home.

Please, shake me, slap me, and set me/us straight and tell me - Does this appear to be a sound investment?  Remember, the home is in Marin county.  Thanks for your feed back in  this regards. Michelle  (Shzasaver)

[Rural]

You know the financial answers already. Sit down with your husband and decide whether his childhood home is worth postponing retirement for several years to the two of you. That's the real question, and it's a purely emotional/ personal value sort of question, so only you guys can answer it. Which purchase is worth more to you: the house or a few years more of retirement?

[Another Reader]

It makes no sense to buy this house.  The only financial benefit would be the future appreciation.  Marin County is very desirable and there is no inventory right now, making prices very high and likely to go higher in the short term. 

Depending on how long your husband's parents lived there, the house may have a very low property tax basis.  A transfer from parents to children does not usually cause a revaluation under Prop 13.  Transfer of ownership between siblings will likely mean a revaluation of the transferred interests at market value.  This could result in a breathtaking increase in your property taxes.  Do NOT use the old property tax basis in your analysis of the cash flow. 

What makes you think the siblings are unreasonable in their value estimate?  Was there an appraisal done?  Has anyone done an analysis of current sales and listings?  You need to know what the property is worth to make a reasoned decision. 

[KingCoin]

Purchasing this home is likely to be a very bad financial decision. Approaching retirement, the last thing you want to do is saddle yourself with a money pit on the other side of the continent.

You also have to ask yourself, is this really the ideal home for your retirement? Under blank slate conditions, would you choose a house of that size, in that location? Almost certainly you would not. Don't let nostalgia cloud your judgement. There's nothing wrong with building new memories in a new place. You can always call up the new owners and ask to swing by the old place to get your nostalgia fix, free of expense and hassle.

[daverobev]

It's ok to dream. But what you are describing sounds like financial suicide.

No brainer; let it be sold, find somewhere else that meets your needs to retire in that won't financially cripple you. Or buy a small RV and travel the country, getting the million dollar views on a very small budget...

[meadow lark]

Only you can decide, but in my opinion no house is worth several years of postponing retirement if you already have a nice place to live.

[honobob]

My husbands family home is available for us to purchase (it has been our dream to live there in retirement). The home is in Marin   (Shzasaver)

1.  If the home is not in the siblings name consult a lawyer to see if you can buy from the estate (2/3's of the proceeds going to siblings) so that you can inherit 100% of low tax base.
2.  Market the house and have a first right of refusal meaning that you can match any valid market offer.  That eliminates any dispute over value.
3.  Marin is nice and property there appreciates very well.  That alone may make this your best investment ever.

[Shzasaver2]

Hi All,
Thank you for the input.
@ HonoBob, alll property had been in a trust which converted over directly to all brothers upon parents death.  They all share equally so after lots of investigating last summer in regards to property tax it was discovered that it would go up if we bought out the other brothers.  To keep taxes low we would have needed to prove the estate had other assest equal to the 2/3 share of the other brothers that they could receive instead of their share in the house so needless to say since this was not an option (house rich, cash poor estate).
While the taxes is still lower then what would be market value it still increases to a point where total expenses are equal or more then the rent received on the home.   And this would be before any money is spent to improve the property. 
I followed one of the links listed by someone that calculates rental costs including depreciation, etc and once all the numbers are plugged-in the house would costs us money each month.  This includes the cost of higher interest rate on mortgage since it is rental property and not a primary residence.  Kind hard to prove it was a vacation home since we live across the country from the place and would have to keep it rented to cover the mortgage. 
Sad as it is, that our retirement dream will not be living in that home,  we knew it was not wise for us to purchase even though it is in Marin county. We will sell and take the cash to use for a different rental purchase elsewhere.
Thanks for everyones input.

[BPA]

Only you can decide, but in my opinion no house is worth several years of postponing retirement if you already have a nice place to live.

I agree!

[totoro]

I think you made a great decision.

I just wanted to say that I am one of those people that would postpone retirement for the right place.  I tried to buy my grandparents' home but the sellers were not willing.  It is not an ideal property and there are certainly much better RE investments around.

I was willing to buy the home because of the memories.  I'm planning on retiring in this town anyway and the added emotional value was there for me.  My best friend grew up next door, I played in the back alley, and had a fort under the stairs... 

What can I say, I would still do it.