Re: Small-time investor–Helping kids buy 1st home - Posted by Frank Chin
Posted by Frank Chin on August 29, 2005 at 07:28:06:
Teresa:
My mother in law invested with just about all of her children with great success.
Most of the answers below pertains to your gifting cash to buy their own home. My mother in law insisted on buying rentals that cash flow, and the kids buy a place of their own to live in. If the cash flow helps out with the rent and mortgage, all the better.
My in laws were tremendous “savers”, as are many immigrants, and since the death of my father in law, she was cash rich. About 20 years ago, while she was cash rich, whereas her children was not, but each of us had high paying jobs, good credit scores, so why not “invest” together. The kids could also use the tax deductions.
So the deal is:
-She puts down most if not all the down payment on some of the orignal deals.
-The kids pay the mortgage, pockets the cash flow, or make up the difference on any negative (during vacancies)
-The kids handles maintenace, tenants, etc.
It worked well, and my brother in law since done 1031’s on the orignal property into more rentals in view of the surging prices in San Francisco.
She done some investing with us here in the east, so she can boast investments “coast to coast” as we often joke with her. She began all of this while a “widow”. She’s done well for someone who doesn’t speak English well.
I did the same thing with my sister where I provided the funds. SHe helps out with the property management.
You’ll notice its arranged so that there’s a minimum of arguments. She left it up to the kids to sell or reorganize if necessary. Otherwise, you’ll have “I want to sell but you don’t arguments”.
BTW, I needed to borrow 20K against one of the properties once, she provided a loan to us, with each of us having an attorney drawing up the loan documents. We beleive certain things have to be kept “arms length”.
Success or failure of such partnerships depends on the structure of the deal, (she’s like a passive investor), and the personalities of the people involved.
Frank Chin