What to do with two townhouses?
May 13, 2008 1:59 PM   Subscribe

What to do with two townhouses that my sister and I may be taking over ownership of soon?

My sister and I will soon be taking over ownership of two townhouses owned by our critically ill father. They are side by side to each other in a community in the RTP area of NC. We moved our father to the one floor unit back in the fall and have had the two story unit on the market up until last week, when the potential buyer backed out.

Currently, both units have very little equity in them. So, my sister and I (along with our spouses) have started thinking about renting them out once we take ownership.

Obviously, we'd like to do this little 'project' RIGHT in terms of an investment.

What I'm looking for from the hivemind is this...

- How do we go about this as a business entity that benefits both our families?

- What resources can you recommend we utilize to prepare for this undertaking?

My sister and her husband have experience in buying places and fixing them up. They aren't necessarily 'flippers', but they have experience. My wife and I do not.

We want to avoid all potential pitfalls if possible!

Our long term vision would be to use this experience as a stepping off point for a future in real estate investment.

All information is appreciated!
posted by littleredwagon to Work & Money (5 answers total)
Best answer: You could set up a LLP with your sister that owns the property jointly, then mutually agree on a management company who will run the day-to-day operations, collect rent and pay the taxes, etc. Any profits can go into a trust that you reinvest once or twice a year (or quarterly, or whatever). This could be other properties or stocks or whatever you mutually decide at your "shareholders" meeting.
posted by Pollomacho at 2:15 PM on May 13, 2008

The biggest pitfall will be "who answers the phone at midnight" when the water heater breaks, it seems to me.
posted by gjc at 3:37 PM on May 13, 2008

If you just want to rent it and forget it, there are lots of rental management agencies in the area. You didn't say which Triangle town, but here in Durham we've been renting from Apple Realty for years--they really are good to their tenants, which makes me think they are probably good to the people who own our houses as well.
posted by hydropsyche at 3:53 PM on May 13, 2008

My father got together with his brother and sister and bought a few properties back in the day. The difficult thing was that my uncle and aunt both live in separate states, while my dad lives 20 minutes from the properties and on top of that is very handy.

In order to avoid his handiness being ripped off, they agreed on a modest hourly rate to pay him for any one-off work he does on the properties, such as after-tenant cleanup, painting, repair, that kind of thing. (They had the management company hire someone to do more routine work, such as landscaping, so it's not like my dad actually works at the apartments all that much). Then when they get together to divide profits, my dad gets paid for all the work he's done on top of the profits he's due.

You might try something like that with your sister and brother-in-law if they're amenable to fixing the place up themselves. It would be a long time before you would make enough profits even to pay her back for her work, and longer still before you would get a paycheck yourself, but worth it in the long run. House repair is very labor-intensive, and no one likes feeling like they put way more work than the other party in a joint project.
posted by GardenGal at 6:36 PM on May 13, 2008

Response by poster: You might try something like that with your sister and brother-in-law if they're amenable to fixing the place up themselves.

Unfortunately, I'm the local one. They live in MA.

Thanks for all the tips folks!
posted by littleredwagon at 9:24 AM on May 14, 2008

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