Considerations in buying investment property for my daughter

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Skip Towne
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Joined: Tue Aug 07, 2018 2:57 pm

Considerations in buying investment property for my daughter

Post by Skip Towne » Tue Aug 07, 2018 4:05 pm

What factors should I consider, what approach might be better than others in the following situation.

I am considering buying a 2 or 3-family home in a nearby city, partly as investment, partly to stabilize my daughter's housing and partly as a way to pass on some of my assets now, rather than 30 years from now when I'm dead.

My primary home is paid off, my vacation/rental home has a very small and rapidly shrinking mortgage balance. My income far exceeds my spending. Credit score is ~perfect. I am property and rental savvy.

My daughter is partly disabled, working part-time, on disability insurance, so no way could she qualify for a mortgage. But I am absolutely confident in her ability to manage her personal finances and act as on-site building manager (in training ;-))

My idea is that I would buy the investment property, probably with a 30% down payment (or enough to) to make it cash-flow positive with a 15 or 20 year note. Daughter would pay (income adjusted) rent like other tenants, serving as "manager in training". I am a big fan of "Learn by Doing". But I'd rather she learn under my tutelage, avoiding some of the mistakes I've learned from.

I'm thinking about buying the property in an LLC, or a trust, where daughter would be Successor Trustee (or similar) where if things go well, sooner or later I pass on trustee-ship. alternatively if daughter decides to move out of state, if things don't work out, I sell out and regain my assets.

If you are still reading, what is the "best" way to structure the purchase, what considerations should I take? Should I buy it personally, in a trust, or an LLC? I imagine it'd be easier to get the mortgage personally, can I tie into daughter's occupancy for owner-occupied finance, If a trust or LLC is better, what trade-offs should I evaluate? Would a trust or LLC dramatically increase insurance or financing expenses?

Yes, when I've learned all I can from this august group, I'll drag my lawyer and accountant into my planning. But I bet you'll make me seem smarter than I am when I do talk to them.

Thanks in advance!

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