Should I buy a multi-family property with my parents?

May 17, 2017 12:50 PM

Considering taking my parents up on their offer to help me buy a home. They're encouraging me to consider joining them in purchasing a multi-family property instead. Is this a good idea? What questions should I be asking?

My parents have generously offered to help me out with the down payment on a condo, as they did for my brother a few years ago (Option A). I would feel comfortable with this arrangement and level of responsibility. However they're now suggesting that we look at multi-family units instead (i.e. a place that costs 2 to 4 times more than what I'd get in Option A). The idea being that I'd pay the same monthly amount in either option. They want to buy a multi-family place regardless and it just makes sense for me to live there and stop paying rent. I especially like this idea because it'd allow me to have a yard which is important to me, but I don't really know if it's a good idea financially. They are trustworthy, prudent and financially comfortable (house and rental properties paid off, still working with no plans to retire soon, imminent influx of cash of maybe half the price of Option B) yet they are a bit awkward about talking finances so I want to make sure I've considered everything.

Other things: we are all in LA, all have great credit. One parent is very handy and is always working on brother's place; I'm not but am willing to learn. Their other rental properties are a bit distant and have managers so overall we do not have tons of hands-on experience with tenants. My brother and I would share any inheritance equally (including, I guess, their portion of the Option B property although I'm not sure how that'd be calculated).

posted by acidic to Work & Money (9 answers total)

I did this. It's working well so far. If I had bad tenants, maybe I'd like it less. But I have cool tenants.

The extra revenue is nice.
posted by slateyness at 12:55 PM on May 17, 2017

If you buy the property together, there should be something in place to protect you in case they are no longer able to make their own decisions and someone besides you ends up with power of attorney or guardianship. I'm currently in a fucking nightmare over this very thing. I'm not sure what it means to be awkward talking finances, but if they aren't willing to put something in place for this kind of situation, don't do it. Really, don't.
posted by FencingGal at 1:28 PM on May 17, 2017 [9 favorites]

Sorry. I misunderstood. I thought they were just going to contribute, as a gift or early inheritance, to a down payment on the multifamily, not remain actively involved and retain an ownership stake. I second FencingGal's advice in that case.

If the question were clean cut: you own a condo or you own a multifamily, I'd vote multifamily. If it's: you own a condo vs you co-own a multifamily with your folks, I'd vote condo so you own it yourself.

If they would take a co-ownership stake in the condo as well, I'd be a little wary of that too, but you don't have to co-manage both landlord tenant issues and your folks- just your folks, in that scenario.
posted by slateyness at 1:40 PM on May 17, 2017 [1 favorite]

Just to be clear, my advice applies to any property owned with your parents, not just the multi-family. If someone else has legal control, it won't matter how great your parents are or how well you get along with them.
posted by FencingGal at 1:49 PM on May 17, 2017 [2 favorites]

You mentioned that your parent is handy but you're not but willing to learn. The amount of property maintenance on a multi-unit is going to be more than for a condo. How much of the property maintenance are you actually willing to do? Some of it? Most of it? All of it? What are their expectations?
posted by eeek at 2:19 PM on May 17, 2017

I would be careful about entering into a situation that would make it harder for you to liquidate your ownership stake, reduce options for how you use your property, or where equity stakes are not clear. The last part you can talk to a lawyer about, treating it like any other business or investment venture (and whether or not these are your family members, it's probably a good idea to think of it that way). If you ever want or need to sell your home (e.g., you move out of the area for work or want to purchase a larger place) I'm guessing you would have more flexibility if you had your own separate condominium.
posted by 4rtemis at 2:31 PM on May 17, 2017

To minimize problems, I would suggest taking the condo in your name only. Co-owning a property with parents creates all kinds of sticky dynamics, including some that will never occur to you until they happen. If you do decide to co-own with them, hire a lawyer and make sure your rights regarding the property are on-point and clearly stated. Finally, consider the emotional impact of co-owning - is that something you really want? It sounds to me like you are comfortable in your boundaries and independence and I would highly recommend not jeopardizing that.
posted by Crystal Fox at 3:00 PM on May 17, 2017 [2 favorites]

My wife and I are a little stuck right now because she co-owns a house with her folks, which was very generous of them and everything, but we moved away and really want to buy a house *here* but have a property that we can in no way afford on our own in her name. We basically need to wait for her folks to decide what they want to do with the house before we can get clear of it, and that's far from ideal. So my advice would be to look very hard at having a realistic exit strategy, and if you can't make one work under this plan, either get the condo or just let your parents buy you a place and give you free/cheap rent.
posted by restless_nomad at 5:19 PM on May 17, 2017 [3 favorites]

How do you feel about being the live-in landlord and dealing with late rent, clogged toilets, loud parties, etc?
posted by metaseeker at 6:46 AM on May 18, 2017 [1 favorite]