Non-owner contributing to home renovations: what's fair?

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Kryten
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Non-owner contributing to home renovations: what's fair?

Post by Kryten » Thu Aug 16, 2018 4:40 pm

My partner and I separately own our own homes and split time between them. We are in a fulfilling and committed relationship, and have no plans to get married. We do not commingle our finances and have no plans to.

We are both perfectly happy with this arrangement.

We're thinking about doing some renovations to my place, and my partner is interested in contributing financially to that work, but we're not sure how to account for that financial contribution should we ever break up or I sell the house. It seems fair that there'd be some equity in exchange for the financial contribution, but what does that look like?

Are there generally accepted ways to account for this? It's difficult to say that X renovation will result in N increase in resale value, and some renovations have better return than others. Does it make more sense to express any contributions as a dollar for dollar increase in the "cost" of the house, and then figure out what percentage of equity that contribution represents?

Any guidance appreciated.

delamer
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Re: Non-owner contributing to home renovations: what's fair?

Post by delamer » Thu Aug 16, 2018 8:01 pm

If you “do not commingle your finances and have no plans to,” then why would you agree to a set up that gives your partner a claim on your house or other assets?

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Re: Non-owner contributing to home renovations: what's fair?

Post by Raybo » Thu Aug 16, 2018 8:14 pm

How much money is involved? If just a few thousand, I’d consider it a gift and leave it at that. If your partner doesn’t like that, don’t accept the money.

If you want to keep things separate, keep them separate.
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Doom&Gloom
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Re: Non-owner contributing to home renovations: what's fair?

Post by Doom&Gloom » Thu Aug 16, 2018 8:14 pm

delamer wrote:
Thu Aug 16, 2018 8:01 pm
If you “do not commingle your finances and have no plans to,” then why would you agree to a set up that gives your partner a claim on your house or other assets?
This.

Renovate and maintain your own homes and maintain separate finances. What could be cleaner financially?

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Re: Non-owner contributing to home renovations: what's fair?

Post by veindoc » Thu Aug 16, 2018 8:31 pm

Raybo wrote:
Thu Aug 16, 2018 8:14 pm
How much money is involved? If just a few thousand, I’d consider it a gift and leave it at that. If your partner doesn’t like that, don’t accept the money.

If you want to keep things separate, keep them separate.
This. It would be a gift.

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Re: Non-owner contributing to home renovations: what's fair?

Post by JBTX » Thu Aug 16, 2018 8:36 pm

Agree if you want separate finances I'm not sure why she would pay part of yours. If then you want to give her equity in your home that is a bigger mess.

If she wants to give you a gift, and you want to accept it, that is up to you. But at that point it kind of obligates you to assist her with her next major financial expenditure. If that is OK with you then fine but you are moving away from separate finances.

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Re: Non-owner contributing to home renovations: what's fair?

Post by TallBoy29er » Thu Aug 16, 2018 8:36 pm

agree with all the above. if you start commingling finances, things could get complicated. either there is a documented arrangement involved, a documented gift involved, or you pay for it yourself. keep things simple.

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chevca
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Re: Non-owner contributing to home renovations: what's fair?

Post by chevca » Thu Aug 16, 2018 8:50 pm

Kryten wrote:
Thu Aug 16, 2018 4:40 pm
My partner and I separately own our own homes and split time between them. We are in a fulfilling and committed relationship, and have no plans to get married. We do not commingle our finances and have no plans to.

We are both perfectly happy with this arrangement.
Yeah, I think you answered your own question here. If everything is separate and all are happy with that, then keep it separate.

Otherwise, I could get on board with the gifting of the money also. Although, it just doesn't make sense for what's described... why are 'we' talking about renovations to 'my' house?

momvesting
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Re: Non-owner contributing to home renovations: what's fair?

Post by momvesting » Thu Aug 16, 2018 8:51 pm

It’s hard to answer without more info on what kind of renovation we are talking about. If you are DIYing, perhaps your partner could pay for (and keep) tools that are needed. Or when the renovation is finished he/she could buy furniture and decor and if there was a breakup your partner would own that stuff.

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Re: Non-owner contributing to home renovations: what's fair?

Post by Goal33 » Thu Aug 16, 2018 8:51 pm

When I was engaged to be married, I put 5k down towards fiancée’s car. It was her car, title in her name. I believed in separated finances until marriage. I don’t see how it could be anything other than a gift.
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Re: Non-owner contributing to home renovations: what's fair?

Post by GrowthSeeker » Thu Aug 16, 2018 9:32 pm

Kryten wrote:
Thu Aug 16, 2018 4:40 pm
We do not commingle our finances and have no plans to.
Actually, it sounds like your partner might have more plans than you have.
It's difficult to say that X renovation will result in N increase in resale value, and some renovations have better return than others. Does it make more sense to express any contributions as a dollar for dollar increase in the "cost" of the house, and then figure out what percentage of equity that contribution represents?
I doubt if there is a hard fast rule, and if there is, it depends a lot on the specific renovations being done. But if I had to guess, I would guess that a dollar spent on renovating adds half a dollar to the final sale price of the house. A realtor might have a more accurate answer.

The exception of course is on HGTV where all the house renovating and house flipping shows show amazing success and scads of profit. But that isn't like your situation; that's another show.

Also note that if you are doing improvements, more than just replacing what was worn out, then that is an increase to the house's basis so that when it is sold one day, hopefully for more than you paid for it, the capital gain will be decreased by the amount of the increased basis.
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Re: Non-owner contributing to home renovations: what's fair?

Post by MJS » Thu Aug 16, 2018 9:40 pm

Is the renovation something that will make your house more comfortable or welcoming for her - new bathroom, personal workspace or workout space? Will she have considerable input into the renovation? Letting her contribute 10-25% to the cost might be gracious: a way to say Go ahead and make changes to our space.

Otherwise, especially if you are the primary beneficiary from the changes, best not to upset the current system.

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Re: Non-owner contributing to home renovations: what's fair?

Post by Watty » Thu Aug 16, 2018 10:38 pm

It is not ideal but one option would be to get a loan from a bank to pay for the improvements and then have your partner pay part of the monthly loan payment. For example if you get a loan of $XX,XXX to put in swimming pool then your partner could pay part of the monthly payment. If you split up next year then they would have only spent a limited amount and gotten the use of the pool for a year.
Kryten wrote:
Thu Aug 16, 2018 4:40 pm
Any guidance appreciated.


If you do anything complicated have lawyers draw up the paperwork.

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Re: Non-owner contributing to home renovations: what's fair?

Post by Kryten » Fri Aug 17, 2018 11:34 am

Thanks for everyone's thoughtful input. I agree that this isn't the way to keep things simple and separate, and my first reaction to the idea was very much along the lines of no.

However, I am giving this idea careful and thorough consideration, and if I'm able to develop a reasonable model for doing it, I may well proceed. If I can't develop a way to account for it that is clear and fair, then I agree 100%, it's not a good idea.
momvesting wrote:
Thu Aug 16, 2018 8:51 pm
It’s hard to answer without more info on what kind of renovation we are talking about. If you are DIYing, perhaps your partner could pay for (and keep) tools that are needed. Or when the renovation is finished he/she could buy furniture and decor and if there was a breakup your partner would own that stuff.
Plaster work, painting, floors. All told, perhaps $8-10k in work.
GrowthSeeker wrote:
Thu Aug 16, 2018 9:32 pm
Kryten wrote:
Thu Aug 16, 2018 4:40 pm
We do not commingle our finances and have no plans to.
Actually, it sounds like your partner might have more plans than you have.
I don't think so. See below for more.
MJS wrote:
Thu Aug 16, 2018 9:40 pm
Is the renovation something that will make your house more comfortable or welcoming for her - new bathroom, personal workspace or workout space? Will she have considerable input into the renovation? Letting her contribute 10-25% to the cost might be gracious: a way to say Go ahead and make changes to our space.

Otherwise, especially if you are the primary beneficiary from the changes, best not to upset the current system.
MJS has hit on the primary reason. These are aesthetic and functional improvements that will make the house more comfortable and welcoming for her. They are things that I agree require attention, and they'd be nice to get done, but they don't bother me as much as they do her, they are unbudgeted, and they are a lower priority relative to other more necessary work.

The house is a bit more of a project than expected. There are some more pressing things to take care of that will take some time to budget for and complete. This would allow the work she is interested in to proceed independent of my project budgeting.

I'm not interested in going into debt to make improvements, and neither is she.

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Re: Non-owner contributing to home renovations: what's fair?

Post by Whatyear? » Fri Aug 17, 2018 12:02 pm

From reading all these responses, it seems to me the only viable path is the suggestion to treat her contribution as a gift. In my experience you're better off either completely commingle finances, or keeping them completely separate. It's the "in between" that has the most potential to cause disagreement, misunderstanding, resentment, etc.

.

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Re: Non-owner contributing to home renovations: what's fair?

Post by Jack FFR1846 » Fri Aug 17, 2018 12:14 pm

Accept no money and do what you want for renovations. I could imagine where you take $xxxx and then have to deal with the complaints....."oh, that's not a good wall color. Maybe something like a light blue, like I have in my house". You pay for it and if you want to paint all the walls and ceiling black, that's your privilege.
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Re: Non-owner contributing to home renovations: what's fair?

Post by stan1 » Fri Aug 17, 2018 12:31 pm

Agree it would be a gift and accordingly maybe you agree to go 3:1 or 2:1 contributions to account for her not getting any future return. Keep in mind that despite what a realtor or contractor may tell you realistically very few home improvements such as a single $8-10K project add to the value of a house.

The simplest way to do this would be for you to pay for it and let your partner help design it with the caveat that it fits with the rest of the house so it won't become a design liability if you try to sell it in the future. On Bogleheads sometimes its not clear whether we are talking about people whose net worth is $100K, $1M, or $10M. It does matter in a case like this. There are many posts on this forum with someone asking whether the cost of X is frivolous only to find out that they could easily afford it but don't want to pay for it.

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Re: Non-owner contributing to home renovations: what's fair?

Post by goaties » Fri Aug 17, 2018 1:27 pm

Kryten wrote:
Fri Aug 17, 2018 11:34 am
MJS has hit on the primary reason. These are aesthetic and functional improvements that will make the house more comfortable and welcoming for her. They are things that I agree require attention, and they'd be nice to get done, but they don't bother me as much as they do her, they are unbudgeted, and they are a lower priority relative to other more necessary work.
I added the bolding. Whose house is it? If she wants to interfere with your management of YOUR house, then she'd better be prepared to put a ring on it. Sounds like it might be time to re-negotiate the scope of your relationship, before someone gets hurt--financially or emotionally.

Kryten
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Re: Non-owner contributing to home renovations: what's fair?

Post by Kryten » Fri Aug 17, 2018 3:32 pm

Jack FFR1846 wrote:
Fri Aug 17, 2018 12:14 pm
Accept no money and do what you want for renovations. I could imagine where you take $xxxx and then have to deal with the complaints....."oh, that's not a good wall color. Maybe something like a light blue, like I have in my house". You pay for it and if you want to paint all the walls and ceiling black, that's your privilege.
I'm not sure I have accurately conveyed the dynamic here. We are both pretty independent people. This is something she has expressed is important to her, and since she's important to me, I'm giving it careful thought. If we were to do this, it would be more of a situation where I would give her broad latitude to make aesthetic decisions, based on review and approval, since, as you point out, it's my house. She'd pay for those improvements. What I want to know is how I might account for that investment in the house.

I mostly don't care about the decor, and she's got much better taste than I do, and has the interest. In some ways, this works to mutual benefit, *if* we can articulate an equitable accounting scheme.

I don't have to stomp around and assert my ownership of the house, because that's not an issue, and that's not a thing I need help with.
goaties wrote:
Fri Aug 17, 2018 1:27 pm
I added the bolding. Whose house is it? If she wants to interfere with your management of YOUR house, then she'd better be prepared to put a ring on it. Sounds like it might be time to re-negotiate the scope of your relationship, before someone gets hurt--financially or emotionally.
You know, some of these responses are illuminating. I don't view this as interfering. The house (yes, MY house) is a project, and my priorities are on other things. She spends a lot of time in MY house, and I want her to be comfortable there, because I like it when she's there.

These are improvements that would make her happy, and what's more, they're things that I *agree* could/should be improved, but they are *not* on my priority list.

*If* there's a fair and equitable way to protect my interests in my house, and to protect her contribution to the improvement of that house, great. If not, then it's not happening, but I've done my due diligence.

I don't want a ring. She doesn't want a ring. This isn't about a ring. I'm not going to tell her to go pound sand and if she wants to make improvements, she's got to eat the cost, because I love and respect her and that not how you treat someone you love and respect. The whole *point* of my question is to preclude financial hurt.

Can we get back to the question at hand, which is really one of accounting?

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Re: Non-owner contributing to home renovations: what's fair?

Post by runner540 » Fri Aug 17, 2018 3:43 pm

Kryten wrote:
Fri Aug 17, 2018 3:32 pm
Jack FFR1846 wrote:
Fri Aug 17, 2018 12:14 pm
Accept no money and do what you want for renovations. I could imagine where you take $xxxx and then have to deal with the complaints....."oh, that's not a good wall color. Maybe something like a light blue, like I have in my house". You pay for it and if you want to paint all the walls and ceiling black, that's your privilege.
I'm not sure I have accurately conveyed the dynamic here. We are both pretty independent people. This is something she has expressed is important to her, and since she's important to me, I'm giving it careful thought. If we were to do this, it would be more of a situation where I would give her broad latitude to make aesthetic decisions, based on review and approval, since, as you point out, it's my house. She'd pay for those improvements. What I want to know is how I might account for that investment in the house.

I mostly don't care about the decor, and she's got much better taste than I do, and has the interest. In some ways, this works to mutual benefit, *if* we can articulate an equitable accounting scheme.

I don't have to stomp around and assert my ownership of the house, because that's not an issue, and that's not a thing I need help with.
goaties wrote:
Fri Aug 17, 2018 1:27 pm
I added the bolding. Whose house is it? If she wants to interfere with your management of YOUR house, then she'd better be prepared to put a ring on it. Sounds like it might be time to re-negotiate the scope of your relationship, before someone gets hurt--financially or emotionally.
You know, some of these responses are illuminating. I don't view this as interfering. The house (yes, MY house) is a project, and my priorities are on other things. She spends a lot of time in MY house, and I want her to be comfortable there, because I like it when she's there.

These are improvements that would make her happy, and what's more, they're things that I *agree* could/should be improved, but they are *not* on my priority list.

*If* there's a fair and equitable way to protect my interests in my house, and to protect her contribution to the improvement of that house, great. If not, then it's not happening, but I've done my due diligence.

I don't want a ring. She doesn't want a ring. This isn't about a ring. I'm not going to tell her to go pound sand and if she wants to make improvements, she's got to eat the cost, because I love and respect her and that not how you treat someone you love and respect. The whole *point* of my question is to preclude financial hurt.

Can we get back to the question at hand, which is really one of accounting?
Accounting and legal: for an $8-10k project, are you (plural) willing to spend a couple thousand more on docs, titles, etc. to ensure your(plural) rights and wishes are spelled out? It just seems really messy and counter to the stated preference to keep everything separate.

Edit: Most of us have wants, but I don't expect others to fund them. If they do, it's a gift and viewed as such.
Last edited by runner540 on Fri Aug 17, 2018 3:52 pm, edited 1 time in total.

theluckyone
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Re: Non-owner contributing to home renovations: what's fair?

Post by theluckyone » Fri Aug 17, 2018 3:48 pm

Perhaps a simple equation might work best. If your house is now worth $500,000 (just an easy number to work with) and your partner pays for $10,000 in renovations, that $10,000 represents 2% of the value of your home. If you sell in five years and the sales price is $600,000, apply that same 2% to the sales price, yielding $12,000 that she would receive. Her share of the equity will rise at the same rate your share of the equity does and you won't have to worry about how much or if the improvements caused the sales price to increase.

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Re: Non-owner contributing to home renovations: what's fair?

Post by Kryten » Fri Aug 17, 2018 3:59 pm

theluckyone wrote:
Fri Aug 17, 2018 3:48 pm
Perhaps a simple equation might work best. If your house is now worth $500,000 (just an easy number to work with) and your partner pays for $10,000 in renovations, that $10,000 represents 2% of the value of your home. If you sell in five years and the sales price is $600,000, apply that same 2% to the sales price, yielding $12,000 that she would receive. Her share of the equity will rise at the same rate your share of the equity does and you won't have to worry about how much or if the improvements caused the sales price to increase.
Thank you. That's the kind of idea I was looking for.

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Re: Non-owner contributing to home renovations: what's fair?

Post by chevca » Fri Aug 17, 2018 5:24 pm

Kryten wrote:
Fri Aug 17, 2018 11:34 am
momvesting wrote:
Thu Aug 16, 2018 8:51 pm
It’s hard to answer without more info on what kind of renovation we are talking about. If you are DIYing, perhaps your partner could pay for (and keep) tools that are needed. Or when the renovation is finished he/she could buy furniture and decor and if there was a breakup your partner would own that stuff.
Plaster work, painting, floors. All told, perhaps $8-10k in work.

I don't see any way to do this "fair". It's not like you're talking a major remodel or an addition to the house. None of these are things that add any value or that you will really recoup the costs on. By the time you sell, none of these things may be the same or even there anymore.

If she wants to pay any of this to just get it done, I say it is simply a gift to you. How much... I don't know, how about she pays $2500 and you pay the rest? Is cost an issue... do you not have the money for this and she needs to pay it if it were to be done soon?

I certainly don't see her gaining equity in the house by gifting floors, paint, and plaster. Just my take on it.

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Re: Non-owner contributing to home renovations: what's fair?

Post by Minty » Fri Aug 17, 2018 6:00 pm

Kryten wrote:
Fri Aug 17, 2018 3:59 pm
theluckyone wrote:
Fri Aug 17, 2018 3:48 pm
Perhaps a simple equation might work best. If your house is now worth $500,000 (just an easy number to work with) and your partner pays for $10,000 in renovations, that $10,000 represents 2% of the value of your home. If you sell in five years and the sales price is $600,000, apply that same 2% to the sales price, yielding $12,000 that she would receive. Her share of the equity will rise at the same rate your share of the equity does and you won't have to worry about how much or if the improvements caused the sales price to increase.
Thank you. That's the kind of idea I was looking for.
The problem with this is that floors, paint and plaster are maintenance items for the most part, and when the house is sold may well not increase the value. When an apartment renter paints, they do not thereby obtain partial ownership of the property. This isn't a situation where a real estate owner needs a bunch of money to make a property marketable or habitable.

Bring in a good real estate agent, ask what the house would list for now, and how much more, if any, if these items were fixed. If, as may be the case, these improvements are of little or no monetary value, then treat the project as you would any other joint consumption, like a big vacation trip--each of you pay part, but because the project creates no value, no further accounting is necessary. If you can't come to agreement on a split that seems fair, don't do the project.
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Re: Non-owner contributing to home renovations: what's fair?

Post by dm200 » Fri Aug 17, 2018 6:12 pm

Kryten wrote:
Thu Aug 16, 2018 4:40 pm
My partner and I separately own our own homes and split time between them. We are in a fulfilling and committed relationship, and have no plans to get married. We do not commingle our finances and have no plans to.
We are both perfectly happy with this arrangement.
We're thinking about doing some renovations to my place, and my partner is interested in contributing financially to that work, but we're not sure how to account for that financial contribution should we ever break up or I sell the house. It seems fair that there'd be some equity in exchange for the financial contribution, but what does that look like?
Are there generally accepted ways to account for this? It's difficult to say that X renovation will result in N increase in resale value, and some renovations have better return than others. Does it make more sense to express any contributions as a dollar for dollar increase in the "cost" of the house, and then figure out what percentage of equity that contribution represents?
Any guidance appreciated.
Maybe - do a very low rate interest only loan to you for some part (maybe half?) of the renovations and you pay this interest ever month. Then, if you split up - you repay the loan in full.

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Re: Non-owner contributing to home renovations: what's fair?

Post by cheese_breath » Fri Aug 17, 2018 6:57 pm

Kryten wrote:
Fri Aug 17, 2018 3:32 pm
...These are improvements that would make her happy, and what's more, they're things that I *agree* could/should be improved, but they are *not* on my priority list.

*If* there's a fair and equitable way to protect my interests in my house, and to protect her contribution to the improvement of that house, great. If not, then it's not happening, but I've done my due diligence.

I don't want a ring. She doesn't want a ring. This isn't about a ring. I'm not going to tell her to go pound sand and if she wants to make improvements, she's got to eat the cost, because I love and respect her and that not how you treat someone you love and respect. The whole *point* of my question is to preclude financial hurt....
If you love her why aren't they on your priority list? Forgive me for being old fashioned, but I thought when you loved someone her priorities became your priorities.

Anyway, I have two possible answers to your question.

(1) The non-owner pays nothing. You pay for it because you love her and want to make her happy.
(2) She pays for everything and you pay her back plus interest at a rate you agree upon before any work starts.

Obviously option (1) requires more love than option (2).
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Re: Non-owner contributing to home renovations: what's fair?

Post by J295 » Fri Aug 17, 2018 7:12 pm

Some sort of equation is a good idea. The one suggested above is reasonable. If you want to discount the 2% in the hypothetical, discount it because they are maintenance/cosmetic items if that’s what makes everybody feel good. Come up with a percentage now and apply it when never trigger event occurs where you will pay your partner money – – a sale of the property, termination of the relationship, death, etc.

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Re: Non-owner contributing to home renovations: what's fair?

Post by veindoc » Fri Aug 17, 2018 7:47 pm

Minty wrote:
Fri Aug 17, 2018 6:00 pm
Kryten wrote:
Fri Aug 17, 2018 3:59 pm
theluckyone wrote:
Fri Aug 17, 2018 3:48 pm
Perhaps a simple equation might work best. If your house is now worth $500,000 (just an easy number to work with) and your partner pays for $10,000 in renovations, that $10,000 represents 2% of the value of your home. If you sell in five years and the sales price is $600,000, apply that same 2% to the sales price, yielding $12,000 that she would receive. Her share of the equity will rise at the same rate your share of the equity does and you won't have to worry about how much or if the improvements caused the sales price to increase.
Thank you. That's the kind of idea I was looking for.
The problem with this is that floors, paint and plaster are maintenance items for the most part, and when the house is sold may well not increase the value. When an apartment renter paints, they do not thereby obtain partial ownership of the property. This isn't a situation where a real estate owner needs a bunch of money to make a property marketable or habitable.

Bring in a good real estate agent, ask what the house would list for now, and how much more, if any, if these items were fixed. If, as may be the case, these improvements are of little or no monetary value, then treat the project as you would any other joint consumption, like a big vacation trip--each of you pay part, but because the project creates no value, no further accounting is necessary. If you can't come to agreement on a split that seems fair, don't do the project.
None of the improvements you mentioned will significantly increase the value of your home. And in time may be negative if trends change in terms of paint color and decor. To give her a certain percentage of your home value to compensate is selling yourself short. Since it seems like this is not a priority to you and you could probably afford it on your own, then I would give her a compensatory gift. A nice vacation funded by you or a piece of art or jewelry. But a stake in your home for essentially a paint job and maybe some decor items is extremely and undeservedly generous.

I’m glad you clarified because i thought maybe you were renovating a moldy bath or possibly changing out carpeting to a hard floor for allergies or some such valuable improvement, but this does not seem to be the case.

I can sympathize with her. I spent a lot of time at my now husband’s apartment when we were dating and his apartment was completely unwelcoming. The only appealing aspect of it was that it was close to work. Had it not been a rental I probably would have been all over it as well to make it more homey.

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Re: Non-owner contributing to home renovations: what's fair?

Post by theluckyone » Fri Aug 17, 2018 8:46 pm

Minty wrote:
Fri Aug 17, 2018 6:00 pm
Kryten wrote:
Fri Aug 17, 2018 3:59 pm
theluckyone wrote:
Fri Aug 17, 2018 3:48 pm
Perhaps a simple equation might work best. If your house is now worth $500,000 (just an easy number to work with) and your partner pays for $10,000 in renovations, that $10,000 represents 2% of the value of your home. If you sell in five years and the sales price is $600,000, apply that same 2% to the sales price, yielding $12,000 that she would receive. Her share of the equity will rise at the same rate your share of the equity does and you won't have to worry about how much or if the improvements caused the sales price to increase.
Thank you. That's the kind of idea I was looking for.
The problem with this is that floors, paint and plaster are maintenance items for the most part, and when the house is sold may well not increase the value. When an apartment renter paints, they do not thereby obtain partial ownership of the property. This isn't a situation where a real estate owner needs a bunch of money to make a property marketable or habitable.

Bring in a good real estate agent, ask what the house would list for now, and how much more, if any, if these items were fixed. If, as may be the case, these improvements are of little or no monetary value, then treat the project as you would any other joint consumption, like a big vacation trip--each of you pay part, but because the project creates no value, no further accounting is necessary. If you can't come to agreement on a split that seems fair, don't do the project.
It's ten fricking thousand dollars. No need to get so complicated. Sounds like the poster is more concerned about his relationship, as he should be, than a financial transaction.

GUtiger
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Re: Non-owner contributing to home renovations: what's fair?

Post by GUtiger » Fri Aug 17, 2018 9:01 pm

dm200 wrote:
Fri Aug 17, 2018 6:12 pm
Kryten wrote:
Thu Aug 16, 2018 4:40 pm
My partner and I separately own our own homes and split time between them. We are in a fulfilling and committed relationship, and have no plans to get married. We do not commingle our finances and have no plans to.
We are both perfectly happy with this arrangement.
We're thinking about doing some renovations to my place, and my partner is interested in contributing financially to that work, but we're not sure how to account for that financial contribution should we ever break up or I sell the house. It seems fair that there'd be some equity in exchange for the financial contribution, but what does that look like?
Are there generally accepted ways to account for this? It's difficult to say that X renovation will result in N increase in resale value, and some renovations have better return than others. Does it make more sense to express any contributions as a dollar for dollar increase in the "cost" of the house, and then figure out what percentage of equity that contribution represents?
Any guidance appreciated.
Maybe - do a very low rate interest only loan to you for some part (maybe half?) of the renovations and you pay this interest ever month. Then, if you split up - you repay the loan in full.
+1. If she is going to pay into the home it should be as a loan with set ARP and terms. This is far and away the cleanest option if it isn't going to simply be a gift.

Kryten
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Re: Non-owner contributing to home renovations: what's fair?

Post by Kryten » Fri Aug 17, 2018 9:04 pm

cheese_breath wrote:
Fri Aug 17, 2018 6:57 pm
If you love her why aren't they on your priority list? Forgive me for being old fashioned, but I thought when you loved someone her priorities became your priorities.
I dunno. Love is more than blindly taking someone's desires and making them a priority. We're adults. I respect her opinions, and she respects mine. We can have reasoned conversations about things we disagree on, because it's possible for two smart people who love each other to disagree and for that to be ok. And yet, it's still possible to look for ways to make things work that meets the needs/wants/desires of both people. Hence the query about possible options. If I didn't love her, I'd not try. If I didn't believe in the relationship, I'd not try.

It's less about the $10k than it is about caring enough about her to try to find a way to say yes to this that protects her interests and mine. Because protecting her interests and protecting my interests is protecting our interests.

If I didn't care, I'd just let her spend the money and worry about it later.

Kryten
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Re: Non-owner contributing to home renovations: what's fair?

Post by Kryten » Fri Aug 17, 2018 9:07 pm

theluckyone wrote:
Fri Aug 17, 2018 8:46 pm
Minty wrote:
Fri Aug 17, 2018 6:00 pm
Kryten wrote:
Fri Aug 17, 2018 3:59 pm
theluckyone wrote:
Fri Aug 17, 2018 3:48 pm
Perhaps a simple equation might work best. If your house is now worth $500,000 (just an easy number to work with) and your partner pays for $10,000 in renovations, that $10,000 represents 2% of the value of your home. If you sell in five years and the sales price is $600,000, apply that same 2% to the sales price, yielding $12,000 that she would receive. Her share of the equity will rise at the same rate your share of the equity does and you won't have to worry about how much or if the improvements caused the sales price to increase.
Thank you. That's the kind of idea I was looking for.
The problem with this is that floors, paint and plaster are maintenance items for the most part, and when the house is sold may well not increase the value. When an apartment renter paints, they do not thereby obtain partial ownership of the property. This isn't a situation where a real estate owner needs a bunch of money to make a property marketable or habitable.

Bring in a good real estate agent, ask what the house would list for now, and how much more, if any, if these items were fixed. If, as may be the case, these improvements are of little or no monetary value, then treat the project as you would any other joint consumption, like a big vacation trip--each of you pay part, but because the project creates no value, no further accounting is necessary. If you can't come to agreement on a split that seems fair, don't do the project.
It's ten fricking thousand dollars. No need to get so complicated. Sounds like the poster is more concerned about his relationship, as he should be, than a financial transaction.
Yup. We need to find a path forward that we're both comfortable with, and that is clear about what happens in the future, should the future take place. This isn't lawyer territory. This is being scrupulous about one's SO's interests, because you'd want the same if the position were reversed.

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Re: Non-owner contributing to home renovations: what's fair?

Post by Minty » Fri Aug 17, 2018 9:18 pm

theluckyone wrote:
Fri Aug 17, 2018 8:46 pm
It's ten fricking thousand dollars. No need to get so complicated. Sounds like the poster is more concerned about his relationship, as he should be, than a financial transaction.
Right. The "relationship" solution and the simple solution is for OP just to pay the money, and everyone keeps 100% of their own house. But instead, OP is considering giving the significant other part ownership of OP's house. To simplify things, OP wants to transfer a part interest in OP's house. As has been mentioned earlier, this additional complexity is inconsistent with keeping finances separate. I wonder if there are substantial differences in wealth or income that make this situation harder--maybe "ten fricken thousand dollars" is a bunch of dough to OP and SO, in which case whether to spend it becomes a more serious question.
Core Four with nominal bonds and TIPS.

Dottie57
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Re: Non-owner contributing to home renovations: what's fair?

Post by Dottie57 » Fri Aug 17, 2018 9:33 pm

delamer wrote:
Thu Aug 16, 2018 8:01 pm
If you “do not commingle your finances and have no plans to,” then why would you agree to a set up that gives your partner a claim on your house or other assets?
This. Keep things simple and sweet.

five2one
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Re: Non-owner contributing to home renovations: what's fair?

Post by five2one » Fri Aug 17, 2018 9:38 pm

I recommend you keep your finances legally separated just like the rest of your relationship.
If your want to "share" the burdens of relationship then I would practice on something less permanent than a dwelling.

chevca
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Re: Non-owner contributing to home renovations: what's fair?

Post by chevca » Sat Aug 18, 2018 6:23 am

Kryten wrote:
Fri Aug 17, 2018 9:04 pm
It's less about the $10k than it is about caring enough about her to try to find a way to say yes to this that protects her interests and mine. Because protecting her interests and protecting my interests is protecting our interests.

If I didn't care, I'd just let her spend the money and worry about it later.
Reading through the lines here, it sounds like she wants to do these things and/or pay for them because it would be nicer for her to spend time there that way. If that's the case and it's not a big deal for her to spend on this, why not just let her spend the money and worry about it later? I think you're overcomplicating this. If it were to not work out for you two, couldn't you just ask then if she wanted any of the money back?

Is she worried about what's "fair" in this deal, or does she just want to pay for it to be done? Is this something you're both trying to figure out, or something you're trying to come up with on your own? Are you denying her, or delaying her doing this until you figure out what's fair? How might that make her feel? Her interests may simply be to have these smallish things done, so she likes coming over more.

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GoldStar
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Re: Non-owner contributing to home renovations: what's fair?

Post by GoldStar » Sat Aug 18, 2018 6:32 am

delamer wrote:
Thu Aug 16, 2018 8:01 pm
If you “do not commingle your finances and have no plans to,” then why would you agree to a set up that gives your partner a claim on your house or other assets?
Exactly what I was thinking.
You make a black and white statement and then ask how to create a big grey area in between.
If you don't commingle and have no plans to then their should be no contribution from your partner.

41Fin
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Re: Non-owner contributing to home renovations: what's fair?

Post by 41Fin » Sat Aug 18, 2018 6:33 am

If you accept the “gift” be prepared to give a “gift” when her house gets worked on.

Spirit Rider
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Re: Non-owner contributing to home renovations: what's fair?

Post by Spirit Rider » Sat Aug 18, 2018 7:11 am

Kryten wrote:
Fri Aug 17, 2018 3:59 pm
theluckyone wrote:
Fri Aug 17, 2018 3:48 pm
Perhaps a simple equation might work best. If your house is now worth $500,000 (just an easy number to work with) and your partner pays for $10,000 in renovations, that $10,000 represents 2% of the value of your home. If you sell in five years and the sales price is $600,000, apply that same 2% to the sales price, yielding $12,000 that she would receive. Her share of the equity will rise at the same rate your share of the equity does and you won't have to worry about how much or if the improvements caused the sales price to increase.
Thank you. That's the kind of idea I was looking for.
This assumes that the renovation costs provided, result in an equal increase in the value. This is very often not the case. In fact, in some cases renovations can decrease the resale value.

What about sweat equity. How are you going to value that?

Use whatever colorful expression/idiom you choose to describe what this will become.

FoolMeOnce
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Re: Non-owner contributing to home renovations: what's fair?

Post by FoolMeOnce » Sat Aug 18, 2018 8:15 am

cheese_breath wrote:
Fri Aug 17, 2018 6:57 pm
Kryten wrote:
Fri Aug 17, 2018 3:32 pm
...These are improvements that would make her happy, and what's more, they're things that I *agree* could/should be improved, but they are *not* on my priority list.

*If* there's a fair and equitable way to protect my interests in my house, and to protect her contribution to the improvement of that house, great. If not, then it's not happening, but I've done my due diligence.

I don't want a ring. She doesn't want a ring. This isn't about a ring. I'm not going to tell her to go pound sand and if she wants to make improvements, she's got to eat the cost, because I love and respect her and that not how you treat someone you love and respect. The whole *point* of my question is to preclude financial hurt....
If you love her why aren't they on your priority list? Forgive me for being old fashioned, but I thought when you loved someone her priorities became your priorities.
This is pretty harsh. It seems clear to me that this is exactly what OP is doing. On OP's own, these renovations wouldn't be a priority, but due to OP's care for the happiness of their partner, OP is making them a priority.

OP, for such a small amount, it seems perfectly fair to your partner to treat this as a disposable consumer good. Partner pays a portion of the cost, enjoys the benefit of the renovations over the years, and that's that.

Has your partner even expressed any concern over receiving some equity as fairness?

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