|
Post by lifetimeexpatriat on Feb 16, 2011 14:12:09 GMT -5
I know it normally is a bad idea, but hear me out. This case may be different.
My mom has always dreamed of a small weekend house. Her problem is she cannot save. There is something emotional in her that makes her spend every dollar she has. Her husband and her make around 130K+, pay about $600 in rent (he is a super for the building, so most of the rent is covered) and spend everything else.
She is also very honorable about her debts. In her lifetime she has not cheated anyone of a penny. It is unthinkable to her not to pay what she borrowed no matter what - she is an old school that way. She has no problem paying her debts, but save.... not capable. She could and would make payments for the house.
We could loan her money for clothing costs and downpayment, and she would make me part owner of the house. (or take out a lien, or whatever is the best option in this case).
Her husband has worked construction for decades and does really quality work. He can do almost anything. So he can take a and make it into a shiny candy, greatly improving the value of the house. And knowing their high-end taste, whatever they buy can be made nice. And he always wanted to work on his own property.
So what would be the best way to set up such arrangement legally? I have absolutely now doubts in my mom, her stake of the house would be left to me. (Her husband and I always had a strained relationship.) He would get a part stake in the house since he would be putting in all the work.
If done right, this may have a potential of being a great investment for me and DH.
Any advice?
|
|
|
Post by illinicheme on Feb 16, 2011 14:22:38 GMT -5
Personally, I wouldn't touch this type of arrangement with a 40-foot pole.
I don't have any legal experience, so can't offer anything constructive on that front.
|
|
|
Post by Savoir Faire-Demogague in NJ on Feb 16, 2011 14:32:32 GMT -5
The road to hell is paved with good intentions.
|
|
|
Post by lifetimeexpatriat on Feb 16, 2011 14:37:20 GMT -5
The things to keep in mind.
1. I am absolutely sure of my mom. She would give a shirt of her back to help me. And our relationship has always been good. Even when we had fights or whatever it never ever turned nasty. So for your answer, assume 100% she will do whatever is in my best interest and would never try to do otherwise.
2. Her husband mostly does what she wants.
3. His construction abilities are also proven. No question he will do a very high quality renovation. He does that for a living.
|
|
souldoubt
Senior Member
Joined: Jan 4, 2011 11:57:14 GMT -5
Posts: 2,745
|
Post by souldoubt on Feb 16, 2011 14:43:31 GMT -5
Being absolutely sure doesn't change the fact that they make 130K combined, pay very little rent (some covered) and yet they still really don't appear to have much to show for it because they feel the need to spend everything. I don't doubt when you say she'd do anything for you and that she's honorable about her debts but if something happens and one or both of them is out of work then are you ready and willing to step in to make payments so she keeps the house?
My advice is to approach it as you would giving a loan to someone you're not related to. Talk to a lawyer, have any necessary legal documents drawn up, loan docs and so on.
|
|
resolution
Junior Associate
Joined: Dec 20, 2010 13:09:56 GMT -5
Posts: 7,001
Mini-Profile Name Color: 305b2b
|
Post by resolution on Feb 16, 2011 14:50:27 GMT -5
Can you help her set up a down payment account with automatic deposit from her paycheck so she doesn't ever see the money? If she wants a 25k down payment have it set up so that $2k per month gets deposited there instead of her regular account? Or if she is incapable of leaving it alone but she trusts you, maybe get a joint account set up that would require both your signatures to pull the money out?
|
|
olderburgher
Established Member
Joined: Jan 9, 2011 9:55:17 GMT -5
Posts: 347
|
Post by olderburgher on Feb 16, 2011 14:59:13 GMT -5
Run from this idea. If she can't make herself save for something you clain she really wants, she can't be trusted to make the payments needed.
|
|
raeoflyte
Senior Associate
Joined: Feb 3, 2011 15:43:53 GMT -5
Posts: 14,759
|
Post by raeoflyte on Feb 16, 2011 15:04:44 GMT -5
I won't say that she'll never pay you back, and I have invested with family in property. My parents have helped out numerous family members get into homes and overall it has worked out to their advantage in the long run. However, one of my last posts said it isn't something I would likely do again.
It will change your relationship with your mom on some level. Now you will have a business together and people react to those 'issues' differently than they will personal ones. So be careful about it and really think things through.
|
|
Wisconsin Beth
Distinguished Associate
No, we don't walk away. But when we're holding on to something precious, we run.
Joined: Dec 20, 2010 11:59:36 GMT -5
Posts: 30,626
|
Post by Wisconsin Beth on Feb 16, 2011 15:16:16 GMT -5
So what would be the best way to set up such arrangement legally? I have absolutely now doubts in my mom, her stake of the house would be left to me. (Her husband and I always had a strained relationship.) He would get a part stake in the house since he would be putting in all the work. Read more: notmsnmoney.proboards.com/index.cgi?board=finance&action=display&thread=3502#ixzz1E9fIj3jdNot to be morbid but when your Mom passes, are you going to be able to deal with him regarding the loans/taxes/scheduling use of the place?
|
|
Deleted
Joined: May 18, 2024 2:22:21 GMT -5
Posts: 0
|
Post by Deleted on Feb 16, 2011 15:22:13 GMT -5
Noooooooooooooooooooooooooooooooooooooooooooooo!
Look, weekend places usually don't make a whole lot of economic sense in the first place. Most people get bored going to the same place all the time.
If you really want to do something like this consider buying a place for yourself and letting mom and D(SF?) stay for 2 weeks in exchange for some construction project. Even this idea has its limits but at least you limit your exposure to their financial issues.
|
|
Clifford
Established Member
Joined: Dec 22, 2010 15:19:53 GMT -5
Posts: 422
|
Post by Clifford on Feb 16, 2011 15:22:20 GMT -5
You could suggest that, with income of $130K and rent of only $600, they can afford to buy their own weekend house. Since they are not saving, let them spend some of that money on the new mortgage. Why dirty your hands with it?
Yay! Made it to Junior Member!! Now to calculate how much time I have frittered away at work to achieve this milestone...
|
|
|
Post by lifetimeexpatriat on Feb 16, 2011 15:45:04 GMT -5
" If she can't make herself save for something you clain she really wants, she can't be trusted to make the payments needed."
She was never able to save. She always made every payment on everything. Not a day late. Ever. She is very responsible that way.
"Look, weekend places usually don't make a whole lot of economic sense in the first place. Most people get bored going to the same place all the time."
She wants a house with some land in nature. Besides, a weekend house outside NYC is far more affordable than a primary residence in NYC. One can't afford to buy a property here with 130K income without a GIGANTIC down payment.
|
|
NancysSummerSip
Community Leader
Joined: Dec 19, 2010 19:19:42 GMT -5
Posts: 36,373
Today's Mood: Full of piss and vinegar
Favorite Drink: Anything with ice
|
Post by NancysSummerSip on Feb 16, 2011 15:49:15 GMT -5
lifexpat, what happens if mom predeceases her husband, and she's not there for him to listen to, and he decides to do what he really pleases? Like make your life miserable, legal investment be damned. You can draw up all the documents you want, to cover every legal possibility. You cannot control human nature. If Mom dies, her DH might bring a slut into the house, along with slut's bratty little kids. The fact that she has paid her debts honorably is a good thing. But she has zero cushion for what could happen. Even if the house is soundly built, you have no control over the weather, pests, etc. If she gets very sick, and cannot work to cover her bills, what happens then?
|
|
runewell
Established Member
Joined: Jan 3, 2011 15:37:33 GMT -5
Posts: 395
|
Post by runewell on Feb 16, 2011 16:03:39 GMT -5
Step 1. Don't.
If your mom really wanted this house, she would save for it. She doesn't save for it, therefore she doesn't really want it.
Who are you to argue? Just tell her to save for it.
|
|
phil5185
Junior Associate
Joined: Dec 26, 2010 15:45:49 GMT -5
Posts: 6,409
|
Post by phil5185 on Feb 16, 2011 16:08:08 GMT -5
From a longtime landlord - believe me, this is hopelessly silly. I almost don't know where to start, LOL. Literally all rental property partnerships end in train wrecks - one guy wants to put on a roof, the other partner can't. And then one gets divorced, a death, he moves out of state, needs his money, forces a sale. And that is business partners - with relatives it is way more tragic. The beauty of small real estate is that it is small - you can buy a rental by yourself - no partnership trust with terms & conditions - and run it as you wish. This case may be different. She is also very honorable about her debts. and does really quality work. He can do almost anything. of course everyone starts out with 'my relatives are the nicest people, this won't happen to us". No one says 'my relatives are weird and this is going to be a train wreck'.
|
|
Deleted
Joined: May 18, 2024 2:22:21 GMT -5
Posts: 0
|
Post by Deleted on Feb 16, 2011 16:11:03 GMT -5
Ex Pat,
We inherited a $240k place in the mountains outside the L.A. metropolitan area in 2001, gained possession in 2002. No mortgage and we have it in service as a vacation rental.
We still have a net negative (not talking about throwing in depreciation either) of 2k-3k/yr depending on repairs.
I know you can afford it and so can we. But it makes absolutely no financial sense. We've kept it mainly because of sentimental reasons and in DH's mind it was the place to go in case all financial hell broke loose. Late last year we were thinking that's where we would be moving when he heard he might be laid off (and all our other properties have leases through this year).
You know in your heart this makes no financial sense. Why are you considering doing it?
|
|
cronewitch
Junior Associate
Joined: Dec 20, 2010 21:44:20 GMT -5
Posts: 5,976
|
Post by cronewitch on Feb 16, 2011 16:33:23 GMT -5
There is no benefit to this at all for anyone. You will not be equal partners if you pay the down payment and closing cost they will live in it and make the payments so you aren't equal in money or time.
Assume they will love the home and improve it, making all payments as agreed. Assume 10 years from now after they have paid payments for 10 years, replaced the roof, put in landscaping and loved the home her husband has health issues. They can't travel to the home or afford to quit the jobs so must sell the home. How do you split the proceeds of the sale?
What if they don't take wonderful care of your joint asset? Maybe they get older and need to actually start saving for retirement or just lose interest in going there. Since it is a recreational property they won't be there when it snows so will winterize in the fall. They might open the house in the spring and find water damage from an ice dam they didn't know about. They could end up with a huge repair bill and no savings to repair it. Can you afford huge repair bills on your investment property?
They aren't ready to be owners until they learn to handle a budget and save for the home, retirement and emergencies.
|
|
phil5185
Junior Associate
Joined: Dec 26, 2010 15:45:49 GMT -5
Posts: 6,409
|
Post by phil5185 on Feb 16, 2011 17:30:11 GMT -5
Bimbo DeMaximus may well move in after her. LOL - she sounds fun. Have you ever seen the Strongest Man In the World show? They carry giant rocks, throw beer kegs over walls, tow 18 wheelers. One from Iceland is named Magnum verMagnuson - I really like that name.
|
|
Deleted
Joined: May 18, 2024 2:22:21 GMT -5
Posts: 0
|
Post by Deleted on Feb 16, 2011 20:47:23 GMT -5
My father and a friend owned a cabin together for years with good success... the only example of such i know of. The success was because they did not approach the situation as friends. They had legal papers written up, along with who would pay what, who would get what time, conditions it should be kept in, etc. etc. If you are capable of entering into an emotion free contract like that drawn up by a third party and agreed to by both... uh, maybe?... I probably still wouldn't. And eventually one of them did buy out the other in my example as well... Their desires/needs for the property did not grow in similar ways... it was no problem, and they are still friends.... but even when you have a GOOD arrangement, stuff will happen you have to deal with...
|
|
Jake 48
Senior Member
keeping the faith
Joined: Dec 20, 2010 16:06:13 GMT -5
Posts: 3,337
|
Post by Jake 48 on Feb 17, 2011 9:56:03 GMT -5
Expat, I own land jointly w/ my brother,do not do it, it is a big mistake.Here is my dilemma of owning w/ family, the land is mortgage free so only taxes, but here's the problem. Every few months he and his wife get in over their heads with debt, CC's etc.., he refinances his home and resets the clock. It always ends up in a argument w/ me to sell the land to solve his problems. BTW he makes 120-130k, sil makes 25k, they don't manage their money. they have a nice home in a good neighborhood and the sil latest plan is to sell because the house needs some updates
|
|
Firebird
Senior Associate
Joined: Dec 29, 2010 12:55:06 GMT -5
Posts: 12,448
|
Post by Firebird on Feb 17, 2011 11:11:06 GMT -5
The things to keep in mind. 1. I am absolutely sure of my mom. She would give a shirt of her back to help me. And our relationship has always been good. Even when we had fights or whatever it never ever turned nasty. So for your answer, assume 100% she will do whatever is in my best interest and would never try to do otherwise. 2. Her husband mostly does what she wants. 3. His construction abilities are also proven. No question he will do a very high quality renovation. He does that for a living. #1 doesn't really matter. Sorry to sound harsh, but it's reality. People are "absolutely sure" of other people all the time, and that doesn't mean a business deal is a good idea. I trust my mom as much as you trust yours but if she wasn't a saver, I would never in a million years do this deal with her. #2 and #3 are good, but don't outweigh #1. My 2 cents. If you really want to do something like this consider buying a place for yourself and letting mom and D(SF?) stay for 2 weeks in exchange for some construction project. Even this idea has its limits but at least you limit your exposure to their financial issues.I think this is a good compromise-- if you MUST do this. I would still advise against it. But this is YM-- did you really expect anything different? ;D Lifetime, on a different note, how are you doing? How's your little boy?
|
|
Urban Chicago
Established Member
Joined: Dec 23, 2010 9:21:48 GMT -5
Posts: 435
|
Post by Urban Chicago on Feb 17, 2011 11:39:41 GMT -5
In my opinion, this is the real problem. Let's say your Mom passes away first. How are you going to handle owning half of the house with someone you don't get along with? Are there step-siblings to consider? If he dies 1st, who inherits his half? What will happen if he does a great job refinishing the house, but does it all in a style you hate? The list goes on.
|
|
Deleted
Joined: May 18, 2024 2:22:21 GMT -5
Posts: 0
|
Post by Deleted on Feb 17, 2011 12:38:24 GMT -5
This will not work out well. And this is from a person willing to buy rental real estate with her mom. However, 2nd homes are bad investments, when they get old being in nature is less important than being near a hospital and again, what happens if your mother dies first? Think about it this way, would you have bought a property with your stepdad, with you putting up the dp and closing?
|
|
xia
Junior Member
Joined: Jan 3, 2011 9:17:22 GMT -5
Posts: 155
|
Post by xia on Feb 18, 2011 6:46:43 GMT -5
Also since she’s incapable of saving it would most likely mean you would be stucked with all the maintenance/repair bills even if you get free labor from your step-father. Co-worker of mine has a similar arrangement with one of her siblings and she’s always complaining. Whenever there is a repair to be done she just wants to pay her half with cash while her sibling wants to defer the repairs or finance it because they don’t have the cash for it. Big headache.
|
|
cronewitch
Junior Associate
Joined: Dec 20, 2010 21:44:20 GMT -5
Posts: 5,976
|
Post by cronewitch on Feb 18, 2011 14:03:31 GMT -5
Does she really want another house to clean, decorate, repair and maintain? Why>? Read more: notmsnmoney.proboards.com/index.cgi?board=finance&action=display&thread=3502&page=1#ixzz1EL1dCUskMy parents had one 200 miles north. Dad was working there and found a 2 bedroom almost finished house for sale. So he bought it and finished it and lived in it until the job ended, he was in construction so knew the job would end. It was near the ocean and they had a small boat, crab traps and things to enjoy. They invited people to the cabin and they would show up with maybe not even a bottle of wine to share. The cabin had everything a small house would have like a washer and dryer. So to have company mom would go first usually and get the house ready, buy the food, make sure the bedding was fresh, etc. Company would come, use the boat, catch some crab, bring back crab for mom and dad to cook and make crab cocktails, crab salad etc. Company would go home, mom would stay to clean, pack up leftover food, strip beds. Dad would mow the lawn and take care of the boat and tackle. So they took 4 days to have company for the weekend and spent extra on gas, food, utilities, alcohol etc. In the off season they had to drive 400 miles round trip to winterize, mow lawn, wash drapes. It wasn't as much fun as they had thought when they got it so they sold it. It is sometimes better to know someone with a cabin you can visit than to own your own.
|
|
midjd
Administrator
Your Money Admin
Joined: Dec 18, 2010 14:09:23 GMT -5
Posts: 17,719
|
Post by midjd on Feb 18, 2011 19:22:40 GMT -5
OP, from the subject line it sounds as though you may have already made up your mind on this and are just inquiring about the "how"... if so, PLEASE PLEASE PLEASE see a lawyer and have papers drawn up for every possible contingency. It will be well worth the price to have peace of mind.
Also please think carefully about what might happen 10-20 years down the road. When you mentioned not getting along with your stepfather, alarm bells started going off in my head. RE investments can (and usually do) get ugly between family members who LIKE each other... if you start out with a shaky relationship, there is a very slim chance of things working out well.
|
|
busymom
Distinguished Associate
Why is the rum always gone? Oh...that's why.
Joined: Dec 25, 2010 21:09:36 GMT -5
Posts: 28,458
Mini-Profile Background: {"image":"https://cdn.nickpic.host/images/IPauJ5.jpg","color":""}
Mini-Profile Name Color: 0D317F
Mini-Profile Text Color: 0D317F
|
Post by busymom on Feb 19, 2011 13:16:19 GMT -5
Um, lifetimeexpat, remember my relative who has outlived several husbands, who has cleaned out the estate each time (leaving the biological children nothing)? Since it sounds like you are not on great terms with you Mom's current husband, unless you plan to give her the money as a gift, "run away!!!!"
|
|
busymom
Distinguished Associate
Why is the rum always gone? Oh...that's why.
Joined: Dec 25, 2010 21:09:36 GMT -5
Posts: 28,458
Mini-Profile Background: {"image":"https://cdn.nickpic.host/images/IPauJ5.jpg","color":""}
Mini-Profile Name Color: 0D317F
Mini-Profile Text Color: 0D317F
|
Post by busymom on Feb 19, 2011 18:30:48 GMT -5
Expat, I do give you kudos for trying to help your Mom attain one of her dreams. I wouldn't do it, but you sound like a great kid! Lucky Mom!
|
|
|
Post by truthishard on Feb 21, 2011 12:49:50 GMT -5
sounds like you really really want someone to tell you this is a good idea and reasonable....
Its NOT...and 95% of the other posters agree....disaster written all over it with a CAPITAL D!!!!
Now go do the right thing.....smile
|
|
Clever Username
Well-Known Member
Joined: Jan 27, 2011 14:15:59 GMT -5
Posts: 1,313
|
Post by Clever Username on Feb 22, 2011 12:49:56 GMT -5
You may have read this story from me before. But I'll share again.
My mother-out-law. Husband died, mental break, grief spending, denial, gambling, social security fraud, etc. All of that we were doing our best to work through.
But then there was the vacation property. 1/6th share on a lake in the northwoods of WI. Gifted it to her two kids when she couldn't afford taxes and maintenance. Then she sued the entire family to force the liquidation of her share. Simply put, she is now an outcast.
|
|