How can I make this lopsided home purchase fair?
April 6, 2010 6:31 PM Subscribe
What would be a fair way for my dad and I to buy a rental property, if he is providing the down payment?
posted by sideshow to Work & Money (8 answers total)
My dad is thinking about buying a house to rent out. He also would like my wife and I to be the tenants as he's had some bad renters in the past. Because of this, I was thinking it'd be a good idea for tax and investment purposes for us to be part owners of the house. My father would be providing the entire down payment. And, let's assume that the rest of the expenses (taxes, insurance, maintenance) would be split 50/50, the down payment is 20%, and the mortgage is $300k. Also, let's say that we would be tenants for 2-3 years before moving out.
So, my question is: What would a fair setup for this kinda of deal? My guess is one of the following:
1) Pretend it was an 80/20 type loan situation and make payments directly to my dad for the half of the down payment he "loaned" to me.
2) Give my dad a larger percentage of the ownership. So, 60/40 vs. 50/50
My wife and are thinking of relocating to another state, so any answers should take into account that real renters will move in eventually.
Obviously, we'll run this by our CPA to get the story on taxes. Also, we'll figure out the details about what happens if one of us stops paying and all that stuff. Right now I'm trying to come up with a setup that's pretty fair to both parties.