investing in parents' home? - Posted by considering REI

Posted by Dave T on June 27, 2001 at 10:39:04:

“Just didn’t want to let a good thing slip away is all…I am certain that the executor (NOT me) will wish to sell when my parents are gone, and I would have liked to have the upper hand in any possible investment strategy I could put into effect THEN, by owning the property.”

This sounds like an emotional response. Why is it so important to you to own your parents’ home? Why is this such a “good thing”. Why not let the executor sell the property and divide the proceeds. On a cash basis, you end up with the same amount in cash as you would have in equity if you buy out your siblings’ shares of the property.

“This isn’t something I am planning to cashflow immediately, just looking to the future and would like to be in control… or isn’t that a good idea?”

If it doesn’t cash flow immediately, when will it cash flow (if ever)? If it doesn’t cash flow, why not put your money into something that generates income/profit for you?

“Isn’t there some way I could just take over the deed & make some sort of mortgage payments to fulfill the value of the estate (minus my part), or should I just wait and buy out my sibling’s parts of the property at their time of death?”

Once again, if you buy your parents’ home now, you lose the tax advantage of inheritance. You mention giving a mortgage and in your earlier post you said you would give your parents enjoyment of the property for the rest of their lives. Your parents’ estate is not diminished because they sell you the home. They are just converting equity in their property to cash. The cash will still be in their estate, so you really do not diminish the value of their estate by buying their home. Your parents will diminish the value of their estate by spending the cash. Whatever amount they do not reinvest, they may choose to give to your siblings or to charity. If instead you are considering asking your parents to hold the mortgage (owner finance), then the estate executor could accelerate the mortgage to facilitate settling the estate. You would need to be prepared to refinance in your own right if that should happen.

Again I challenge you to submit this plan to a rigorous investment analysis. Since you did not give any numbers, I can’t give you an objective opinion. However, I suspect that when you eliminate emotion from the process, and you may find that this is not really a very good deal for you.

investing in parents’ home? - Posted by considering REI

Posted by considering REI on June 26, 2001 at 16:20:17:

Just wondering if there’s a good way to invest in parents’ home, and what’s the best way to approach it?
They’re both still alive but have offered to “sell” numerous times, it seems like a good investment property, however we already own a home, and don’t have much in the way of finances…
We’d like a way for them to stay in the home, if they wish,…
Also, this property is most likely my siblings’ and my inheritance, so how to keep that intact needs to be addressed…
Any ideas?
I’m totally new at this, just trying to figure out the best way to go about this, if there is a way.
Thanks!

Why invest in parents’ home? - Posted by Dave T

Posted by Dave T on June 26, 2001 at 20:16:46:

What is the upside for you? What will you do with the property? Will it cash flow as a rental?

Is there a compelling reason your parents need to sell? What will they do if they sell their home (to anyone)?

You say that their home is the bulk of their estate, so how does buying their home preserve their estate? If you inherit the property, you inherit at full market value, and if you then sell you have no capital gains tax to pay (no profit on the deal when you sell at your cost basis).

If you buy at FMV, you lose any opportunity to inherit at FMV and sell tax free. If your parents sell at their cost basis, then you may run into gift tax issues.

You don’t give enough detail for anyone to give you an informed opinion.

Re: Why invest in parents’ home? - Posted by still considering

Posted by still considering on June 27, 2001 at 06:15:41:

Just didn’t want to let a good thing slip away is all…I am certain that the executor (NOT me) will wish to sell when my parents are gone, and I would have liked to have the upper hand in any possible investment strategy I could put into effect THEN, by owning the property.
This isn’t something I am planning to cashflow immediately, just looking to the future and would like to be in control… or isn’t that a good idea?
Isn’t there some way I could just take over the deed & make some sort of mortgage payments to fulfill the value of the estate (minus my part), or should I just wait and buy out my sibling’s parts of the property at their time of death? Sorry for such as morbid subject, and obviously I am totally uneducated on the REI topic, so be kind please :slight_smile:
And if there is a better forum for this question type, please point me in that direction…