Buying a condo for my parents, advice

pastalady · January 2014

Hi! Some background info:

My parents have rented for the last 20 years. They currently pay about 1950 a month for an apartment.

My sister who is special needs lives with them.

As my parents age one thing that would help is a custom handicapped bathroom for my sister.

She is 500 pounds, it's very hard for her step into the shower. A walkin type shower without a tub would help a lot.

My parents will never buy. They are in their late 60s now.

DH and I have been lucky in the real estate market. We have about 250,000 in equity in our own home we could use to help finance a second property.

My parents would sign a lease. We could get them a much nicer place than they currently rent for about 1700 a month.

The extra money would help them too.

And we also have a special needs daughter. Thinking ahead to her future, it would be nice to have that security for her one day.

We have no debt but our mortgage and taking on more makes me a little nervous.

Any issues we should consider.

If you were in our position, would you do it.

Also, another bit of info. I have two other sisters who live in the same building as my parents. They would like to buy, but will not live in a separate building as my parents. They help a lot with my special needs sister. I feel like I owe them this to allow them to buy a place but keep my folks close. They themselves couldn't finance two units, and will not live with my folks. Just the same building. Is that making sense lol?

pastalady · January 2014

Oh yeah, we would renovate the bathroom to make it accessible for my sister. That's why I mentioned it. We have looked into getting it done in a rental and it's a no go.

brij2006 · January 2014

Honestly, I wouldn't do it.

You would be financing into the equity of your existing home to help out your parents. It sounds like they are wonderful people in helping out your sister, and it sounds like you are all close. But if it was that important to them to have this for themselves, then they would find a way to make it happen without having you finance it into the equity of your home and put your own family at financial risk.

Instead I would help them research places that are accommodating in what they are looking for. Or help them put together a budget to be able to purchase a home that fits their needs.

hoffse · January 2014

I agree with Brij. By tapping into your home's equity like this, you are overextending the value of your home's asset base.

While I'm normally not a fan of doing business with family, it sounds like in your situation it would be fine if you purchased a condo for them eventually. It sounds like both you and them could benefit from that going forward. However, I would wait until you can put down real equity - as in cash - before purchasing a second home. Otherwise you are over-leveraging one asset to acquire another.

smerka · January 2014

I would do it, but I wouldn't pull out equity. I'd buy the second property as a rental and use it as an investment property. Just make sure the rent pays all of your expenses. I would also consider buying a duplex or a two flat so your sisters could live in the other unit.

MommyLiberty5013 · January 2014

What type of cost of living area are you all located in? Low? Mid? High?

My next question is about your parents income. How much do they earn each month after taxes, health insurance and retirement savings?

cbee817 · January 2014

smerka said:

I would do it, but I wouldn't pull out equity. I'd buy the second property as a rental and use it as an investment property. Just make sure the rent pays all of your expenses. I would also consider buying a duplex or a two flat so your sisters could live in the other unit.

This exactly

pastalady · January 2014

We wouldn't pull the equity out of our own home. We just have a lot of it so the lender looked at that and approved us based on our own situation and the fact we would have a lease for my parents. All the costs associated with that mortgage would be covered. Mortgage, condo fees and property taxes would be still a little lower than what they pay now in rent. We live in a pretty high cost of living area. Our own home is 450,000 the condo we would buy my parents is 225,000. We also feel like the values will go up. Our city has weathered the bust and boom well. We are in Canada so it's quite different from what the states experienced. As for my sisters, they want to own their own. They need to be mortgage free for retirement. Neither will ever date or marry. My family dynamics are different lol! The only way they would buy is if they can be in the same building as my folks. And since my folks will not buy, they are stuck renting. Does that make sense? My dad makes a good salary. But he is 69 and will retire next year. They have savings but will not buy. They hate the idea of home owning. It's complicated. They hate banks, etc. but they have enough in savings to comfortable pay rent for the next 20 years. They could easily buy a place outright but refuse to do so. Honestly, it's very odd lol! I am waiting to here what rate we would get on this loan and go from there. I feel torn.

pastalady · January 2014

If something happened to my folks situation, we wouldn't have an issue renting the unit. We would actually make money. The idea right now is to give my parents a break and not Charge them market value. So we would charge them 1800 a month when we could easily get 2000.

hoffse · January 2014

If your parents can afford to buy.... then I feel like they should be the ones buying it. I personally dislike the landlord-tenant relationship, especially with family members. You will be on the hook for a lot of stuff as their landlord. It doesn't sound like there's anything stopping them from making the investment other than a general distrust of banks. That wouldn't be compelling enough for me to take the plunge.

Sisugal · January 2014

Do it, but don't touch your equity in your home to do it.
Keep it as a rental property.
Make sure you can afford to take on the costs of the condo on your own should something happen to one of your parents.
IMO this is what having money is about - helping others when your own needs (note I did not say all the wants and luxuries) are taken care of.

mssm2012 · January 2014

Does the 1800 cover the additional expenses associated with it not be an owner-occupied building?

Property taxes are often higher (non-homestead), property insurance is more, you may have additional tax liability for the "income", filing your personal income taxes becomes slightly more complicated (possible additional charges by your accountant).

katlizabeth · January 2014

I have no financial advice except to not bite off more than you can chew...don't risk your/Dh/lo well being for other family. Emotionally, I would do it. We're in a similar (yet different) spot. My mom bought her childhood home from her siblings when her mom passed away. For a variety of not logical reasons, my dad basically forced her to sell it. We bought it, knowing at my brother and his five children live there, rent free. They still do. We can afford the second mortgage, plan to tear down that house within 10 years, and build our own (it on a lake in our town). For now we're helping those 5 children and we got a steal in the lake property. It probably wasn't the best use of our money, but we've looked at our finances and we're doing we'll now and for retirement, so we decided to do it.

sillygoosegirl · January 2014

Interesting situation. I'm leaning toward yes, buy it. But if your parents could afford to buy and are choosing not to, I wonder if you buying a place and renting it to them would make the prospect any more appealing. If they don't want to take on that risk themselves, will they want you to take it on for them?

duckie1905 · January 2014

I understand the desire to help your sister and your family obviously has non-traditional family dynamics.

IMO, if they are able to buy and need to buy then they should buy. It isn't your responsibility to buy and then rent for them because of their own complicated issues with banks and home ownership. If they want to do right by your sister and she needs to live in a modified home then they need to step up and make that happen for her. Or, they just need to deal with the fact that their decision to never purchase a home makes things potentially more difficult for them and your sister.

Buying a condo for my parents, advice

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