Siblings and Inherited Property

[sal paradise]

Bogleheads,
My partner and 3 siblings inherited a single family home. My partner and one sibling will be buying the other two out. The home will become an investment property. There will not be any bank financing involved. Multiple appraisals were completed and a home inspection will be completed. Are there other things that should be addressed? Should the average of the appraisals be used? Can the appraised value be reduced by realtor costs even though realtors are not involved? Should my partner and other sibling form an LLC?
Appreciate any insight,
Sal

[Jack FFR1846]

The price is up to them. Sure, they could just use an appraised value. It's not going to be exact and if the house were put on the market, it would likely drop 10% between offer/acceptance, repairs, taxes paid and real estate agent fees. But the siblings could agree on any number. They could pull a number out of the air if they wanted to.

[02nz]

Others with more expertise will no doubt chime in, but to me, this is the wrong time to nickel and dime the two siblings being bought out, especially if they're less well off. If the spread between the average of the appraisals and the highest one isn't huge (say within 3-5%), I'd just go with the higher value.) And taking realtor costs off the appraised value when no realtor is involved seems to me really small. But maybe that's just me.

[arcticpineapplecorp.]

definitely use an LLC. That is, unless you don't mind having your personal assets at risk of a tenant's or stranger's (who falls on sidewalk) lawsuit.

[Sandtrap]

Bogleheads,
My partner and 3 siblings inherited a single family home. My partner and one sibling will be buying the other two out. The home will become an investment property. There will not be any bank financing involved. Multiple appraisals were completed and a home inspection will be completed. Are there other things that should be addressed? Should the average of the appraisals be used? Can the appraised value be reduced by realtor costs even though realtors are not involved? Should my partner and other sibling form an LLC?
Appreciate any insight,
Sal

1. Sometimes, in estate distributions, a property will be put on the market to get a variety of actual offers. Then those offer prices will be averaged or other formula and that used as criteria.

2. Can the appraised value be reduced by realtor and other costs? Absolutely.

3. Do whatever you have to do to cover yourself from liability, especially where a rental property is involved. IE: LLC, Umbrella policy, etc, etc.

4. Put in writing in detail an agreement between owners on how to divide up expenses and income. Open a separate account just for this. Do not commingle rental income with personal funds.

5. If any owner puts in "sweat equity", renting to tenants, trouble calls, check outs, repairs, etc. Then document that. Things need to be clear down the line when it comes time to sell.

6. If there happens to be losses, how will the various owners pay them?

7. Details and small details.

[ChrisC]

How did your partner inherit this property? Was it by transfer while the prior owner was living, or upon the prior owner's death by will, or without a will -- and how did the siblings own the property (tenants in common, joint tenancy, etc) this could affect your tax basis in the property when the other siblings are bought out. I don't mean to make this complicated, but it's not as simple as one would think. Get a lawyer to advise you and document the transfers.

I inherited a 4 family/apt brownstone bldg in NYC with two of my siblings, and I wish I could buy them out but it would cost me a lot of money and would probably cause internal family strife. We did form an LLC to hold the property because: (1) it solved and equalized title ownership interests, (2) and we needed additional liabilty shields provided by the LLC -- I did not think commercial insurance policies fully protected me and my siblings.

[malabargold]

It’s family.
Insist on using the highest appraisal.

[Xrayman69]

Had a very similar situation recently. Things didn’t work out like we would have liked but in the end it is BUSINESS when dealing with family.

The family members being bought out may potentially feel slighted if the house is sold in the future for a significant gain. However they will say nothing if sold at a loss compared to the buy out cost.

Get a bank appraisal as if you were to finance the property for a 50% mortgage value. This may cost you a few hundred dollars in processing but it is a neutral party that has no stake other than appraising the property for relative worth. This is also useful for future capital gains valuation if you decide to ever sell in the future.

Given that it is just BUSINESS there are typically 9-10% costs in “selling” property from real estate agents (6%) to taxes to closing costs etc. if you decide to sell in the future these costs will be present and no family member will be subsiding this real cost that weighs down the final proceeds after cost. Perhaps a “nice” gesture would be lower the cost of the appraised bank value by 5% to account shared costs.

In my situation the other family member placed what I felt to be an unreasonable value on the home and thus it was put up for sale and the market revealed the actual value of the home which was significantly below the family members “expert expectations” (greater than 15% off not counting costs. The family member has not been and is not the most financially literate individual. Upon realization that there would be costs associated with selling the property that decreases the final proceeds by 9% the family member was very upset with the process of “why did they get 6%”. I suspect that this sudden windfall (large in relations to the family members financial state) will be squandered.

[CAsage]

Take the average of several appraisals, and subtract 8~10% for normal and expected transaction costs if the property was to be sold today. You can swing that number a little higher if you are feeling generous, but do not overlook the fact that if sold today, there would be costs and expenses that would have to be paid. Money and family are volatile mixes, so allow for a little emotion. If the siblings being bought out believe they are being shortchanged, put it on the market with the intention of actually selling it. Note that if you get an offer, you are legally bound to sell so no fishing here! You can always buy a different property. Get realistic appraisals and find out what the selling/prep/repair costs are in your area.

[Thesaints]

Whichever all the heirs will agree to in writing will work best. Anything else won't work, one way or another.

[8foot7]

Average of three appraisals and then deduct 6% for realtor fee would be fair, I think.

If people balk at the cost of three appraisals (that's 1,200 bucks split across four parties, so there really shouldn't be an issue), then agree to use the lower of two appraisals.

It's family but it's also business and you want to proceed fairly to all parties while also protecting your own interests.

[clydewolf]

I think the sellers should have a requirement that the house can not be sold for 3 years. They do want the buyers to quickly turn around and sell the house for a large profit.

[dbr]

Maybe the house should be sold and the proceeds split four ways exactly. If your partner and the other sibling want to go into the rental real estate business they can take the proceeds and buy something. Even if that sticks them with a little higher buying and selling costs it could save a lot of debate and a lot of rancor over the house.

[Thesaints]

Maybe the house should be sold and the proceeds split four ways exactly. If your partner and the other sibling want to go into the rental real estate business they can take the proceeds and buy something. Even if that sticks them with a little higher buying and selling costs it could save a lot of debate and a lot of rancor over the house.

It will certainly make some real estate agents and the taxman happy.

[sal paradise]

Maybe the house should be sold and the proceeds split four ways exactly. If your partner and the other sibling want to go into the rental real estate business they can take the proceeds and buy something. Even if that sticks them with a little higher buying and selling costs it could save a lot of debate and a lot of rancor over the house.

It will certainly make some real estate agents and the taxman happy.

I appreciate everyone's feedback. Selling the house and splitting it four ways is definitely the cleanest way, but unfortunately, there is some sentimental value to keeping the house.
As far as setting up an LLC, can the LLC be set up in a different state than the property?

[8foot7]

I think the sellers should have a requirement that the house can not be sold for 3 years. They do want the buyers to quickly turn around and sell the house for a large profit.

Along these lines, it might be good to have in the sales agreement a way in which the sellers now participate in a portion of the buyer's upside; for instance, if the house is sold within three years, current sellers will each receive 25% of the difference between current appraised price and contract price at the time of future sale. That splits the appreciation four ways, 25% to each family member, so that any short-term large profits are fairly shared.

Obviously that creates some perverse incentives 2.5 years from now if interest in the property from potential buyers builds, but you can't control everything.

[Tamarind]

Absolutely set up the LLC. It's advisable to have the LLC registered in the same state as the property, especially if renting the property is the only business being conducted by the LLC.
I think some states tax more if the owner is out of state. Also think of it as another way to be clear about the separation between the LLC and it's owners. It shouldn't matter where the owners live. As a landlord you really want that veil to be solid.

Make sure to actually think through the articles of incorporation for the LLC, and how owners will split ownership and duties. You can do this yourself if you are so inclined (I have), or consult an attorney.

Make sure the LLC exists before the deal goes through such that the 4 owners are selling to the LLC.

Make sure the LLC carries appropriate insurance before the property is rented.

Though not strictly financial, I'd suggest being generous to the other siblings, ie using a higher appraisal (avg of top 2?) and/or not subtracting realtor costs you aren't actually incurring. While you might get away with it if sibs are less savvy, it 1) doesn't reflect well on you and 2) if all 4 inherited equally you must get consent of at least one sib to sell at all.

[Carefreeap]

Maybe the house should be sold and the proceeds split four ways exactly. If your partner and the other sibling want to go into the rental real estate business they can take the proceeds and buy something. Even if that sticks them with a little higher buying and selling costs it could save a lot of debate and a lot of rancor over the house.

It will certainly make some real estate agents and the taxman happy.

I appreciate everyone's feedback. Selling the house and splitting it four ways is definitely the cleanest way, but unfortunately, there is some sentimental value to keeping the house.
As far as setting up an LLC, can the LLC be set up in a different state than the property?

It's going to end badly I hate to say. No tenant is going to take care of the property the way the parents did. Multiple partners mean multiple problems. Reminisce and enjoy the good times but sell and move on.

[sal paradise]

Update on property:
In the winter, two appraisals were completed, both came in at the same price $200,000. Both appraisals stated that they are making assumptions the septic and roof (snow covered at the time) are in fair condition. In early spring, a home inspection was completed. It showed that a new septic is needed and a roof will need to be replaced in the next few years. There is currently water leaking in from a skylight. The estimates of the repairs comes out to around $25,000. The buyers are asking for the appraised value minus the repairs, $175,000. The sellers are refusing to come down from the $200,000.
Am I missing something? Are the sellers being unreasonable in this transactions?

[HomeStretch]

Possibly. If they get an offer for $200k as is, then no. If no buyer will offer $200k for the property as is, then yes.

Will it be easy to get another buyer if the sellers don’t work with the current buyer? Buyers may be reluctant to make an offer on a property that needs major work like a new septic system and roof.

[FoolStreet]

It’s family.
Insist on using the highest appraisal.

Since it’s family, seems like you would want to take an average to be fair to all family members.

[FoolStreet]

Update on property:
In the winter, two appraisals were completed, both came in at the same price $200,000. Both appraisals stated that they are making assumptions the septic and roof (snow covered at the time) are in fair condition. In early spring, a home inspection was completed. It showed that a new septic is needed and a roof will need to be replaced in the next few years. There is currently water leaking in from a skylight. The estimates of the repairs comes out to around $25,000. The buyers are asking for the appraised value minus the repairs, $175,000. The sellers are refusing to come down from the $200,000.
Am I missing something? Are the sellers being unreasonable in this transactions?

Interesting. Do the buyers have any deep desire to purchase this particular property as a rental? They could let the estate sell the property, take their cash and buy another possibly better performing rental property.

This is where the sellers aren’t being fair and seem to be holding the buyers hostage out of misguided sentimentality.

Or if there is some additional value in this particular property to the buyers, then they should do their best to come to a quick middle ground and complete the transaction as quickly as possible.

Curious, Is there a reason the two buyers want to be partners? Would they be partners if they took their cash and bought a different property?

[student]

Update on property:
In the winter, two appraisals were completed, both came in at the same price $200,000. Both appraisals stated that they are making assumptions the septic and roof (snow covered at the time) are in fair condition. In early spring, a home inspection was completed. It showed that a new septic is needed and a roof will need to be replaced in the next few years. There is currently water leaking in from a skylight. The estimates of the repairs comes out to around $25,000. The buyers are asking for the appraised value minus the repairs, $175,000. The sellers are refusing to come down from the $200,000.
Am I missing something? Are the sellers being unreasonable in this transactions?

I learn this line from another poster in a different thread. Offer to sell it for $200,000 to the seller. Forget about sentimental value, just sell it.

[chw]

Bogleheads,
My partner and 3 siblings inherited a single family home. My partner and one sibling will be buying the other two out. The home will become an investment property. There will not be any bank financing involved. Multiple appraisals were completed and a home inspection will be completed. Are there other things that should be addressed? Should the average of the appraisals be used? Can the appraised value be reduced by realtor costs even though realtors are not involved? Should my partner and other sibling form an LLC?
Appreciate any insight,
Sal

Generally, these type of transactions can be difficult with several related parties on each side with different opinions of how things should be done. While some of the items (to value the property) you mention may seem “fair”, they may come across as nit picky to the sibs being bought out, and may lead to resentment down the road if the buyers do well financially with the property. Generally if the highest appraised value isn’t too far off from the average, perhaps consider paying it. Regarding other fees, a local real estate attorney should help you with which costs should be borne by either the seller or buyer. The attorney should also do a proper title search (usually at least 50 years) to make sure the title is clear of unexpected defects. The buyers and sellers ideally will each have their own attorney who can help negotiate the transaction, and help tamp down any emotions that may become involved in the transaction.

[fru-gal]

Note that if you get an offer, you are legally bound to sell so no fishing here!

Excuse me, what? I had my previous house on the market for some time and did not accept a number of initial offers.

[JoeRetire]

Am I missing something? Are the sellers being unreasonable in this transactions?

Are the sellers letting their sentimentality get in the way here? Or do the sellers feel strongly that someone else will come along and pay the full appraisal price in spite of the necessary repairs?

Note that in many locales the sellers must now disclose the needed repairs to any other potential buyers.

I have always believed that a house is only worth what someone will pay for it.

[gd]

Selling the house and splitting it four ways is definitely the cleanest way, but unfortunately, there is some sentimental value to keeping the house.

Two sibling owners, with "sentimental value" involved in an investment property. You need a written agreement specifying when and how the partnership will terminate.

[Longdog]

Something doesn't seem right to me, or maybe I don't understand the eventual transaction. You have an inherited house that is evenly split between four siblings.

Case 1: If the house is worth $200K, and is evenly owned between 4 people, then each person has equity of $50K.
Case 2: If the house is worth $175K, each person has equity of $43,750.

In case 1, to make the other two "whole" each of the two sibling buyers would pay each of the two sibling sellers $25K.
In case 2, each of the two sibling buyers would pay each of the two sibling sellers $21, 875

If the house sold on the open market for $200K through a realtor, after real estate commissions the net would be $188K. If it sells for $186K or less, the proceeds would be under $175K.

Assuming it sells for $200K, each person would net $47K.

So, what this means is that the sellers feel that it is worth taking a risk and possibly getting an extra $3250. Wow.

In my opinion, the two siblings who wish to buy the other two out should say, "never mind, let's put it on the market and split the proceeds." They can change their minds at any time before the house sells.

[not4me]

Update on property:
In the winter, two appraisals were completed, both came in at the same price $200,000. Both appraisals stated that they are making assumptions the septic and roof (snow covered at the time) are in fair condition. In early spring, a home inspection was completed. It showed that a new septic is needed and a roof will need to be replaced in the next few years. There is currently water leaking in from a skylight. The estimates of the repairs comes out to around $25,000. The buyers are asking for the appraised value minus the repairs, $175,000. The sellers are refusing to come down from the $200,000.
Am I missing something? Are the sellers being unreasonable in this transactions?

I would think that after the appraisals came in & before the home inspection was done, the buyers established in their minds that $200k was a ceiling & sellers saw it as a floor. I've seen similar cases before & sellers think if they give on this, there will always be another repair that could be done & they don't see it as their responsibility.

If I were the buyer, I would pull my offer & look for another rental I could buy once this sold. I wouldn't buy another yet though. Help the sellers understand the difference in what they walk away from the table with after RE commission paid, etc. If someone pays the $200k (or more), then fine. Else, after a while, the buyers might come back with an offer of $180k!

[Broken Man 1999]

Do business with your head, not your heart!

Broken Man 1999

[CurlyDave]

Looking at this from a great distance, this sounds like the beginning of a family feud. Three will be no good outcome.

Sell it and be done with it. Every sibling is going to get enough money for a down payment on a $200k rental if they want it, and any of them can do this. If the venture is successful, there will be no recriminations because the others do not need to know of the success.

Another fair way to do it might be to agree that the siblings who want to buy the house have the right of first refusal -- they can match any offer and get the house themselves. BUT, if there are only low offers, there will be decades of claims that the buyers lowballed the sellers on the deal.

Truth and rational thought are frequently losers in family matters.

[tadamsmar]

The price is up to them. Sure, they could just use an appraised value. It's not going to be exact and if the house were put on the market, it would likely drop 10% between offer/acceptance, repairs, taxes paid and real estate agent fees. But the siblings could agree on any number. They could pull a number out of the air if they wanted to.

I don't think this is true.

I think you are legally (or by regulation) required to use the fair market value. If you want to do something different, then gifts are being exchanged and they should be documented as such.

I did a similar transaction. There were county rules about fair division based on market value. There were state taxes based on market value. There were representations to the IRS based on market value.

Perhaps you can get away with pulling a number out of the air, but it's not kosher.

[tadamsmar]

Bogleheads,
My partner and 3 siblings inherited a single family home. My partner and one sibling will be buying the other two out. The home will become an investment property. There will not be any bank financing involved. Multiple appraisals were completed and a home inspection will be completed. Are there other things that should be addressed? Should the average of the appraisals be used? Can the appraised value be reduced by realtor costs even though realtors are not involved? Should my partner and other sibling form an LLC?
Appreciate any insight,
Sal

An LLC could provide legal protection of one partner from the other. For instance, if one partner is a jack-leg who violates landlord regulations or building codes and this results in an injury due to negligence, then an LLC with written bylaws specifying that codes and regulations must be followed could protect the other partner in some circumstances.

[WWJBDo]

There is no tax advantage to buying out a sibling of inherited property, so that does not alter the price from the marketplace.

If there is sentimental value to the house, then the value to the purchasing sibling is greater than the market price and they should be willing to pay a little more. If they are not willing to pay more than the 'market price' (let's call that $175k in this case) then they don't place any extra monetary value on the sentimentality of the property. If that's the case, then selling the property and paying out the proceeds equally, then buying a place next door may be better for ongoing family relations.

[Gill]

The price is up to them. Sure, they could just use an appraised value. It's not going to be exact and if the house were put on the market, it would likely drop 10% between offer/acceptance, repairs, taxes paid and real estate agent fees. But the siblings could agree on any number. They could pull a number out of the air if they wanted to.

I don't think this is true.

I think you are legally (or by regulation) required to use the fair market value. If you want to do something different, then gifts are being exchanged and they should be documented as such.

I did a similar transaction. There were county rules about fair division based on market value. There were state taxes based on market value. There were representations to the IRS based on market value.

Perhaps you can get away with pulling a number out of the air, but it's not kosher.

There is no requirement that arm's length buyers and sellers use fair market value. Nobody is intending to make a gift here. Buyers can overpay if they wish or sellers can give buyers a good deal if they wish. Given the facts in this case there is no desire by anybody to make a gift and so no gift is involved.
Gill

[tadamsmar]

The price is up to them. Sure, they could just use an appraised value. It's not going to be exact and if the house were put on the market, it would likely drop 10% between offer/acceptance, repairs, taxes paid and real estate agent fees. But the siblings could agree on any number. They could pull a number out of the air if they wanted to.

I don't think this is true.

I think you are legally (or by regulation) required to use the fair market value. If you want to do something different, then gifts are being exchanged and they should be documented as such.

I did a similar transaction. There were county rules about fair division based on market value. There were state taxes based on market value. There were representations to the IRS based on market value.

Perhaps you can get away with pulling a number out of the air, but it's not kosher.

There is no requirement that arm's length buyers and sellers use fair market value. Nobody is intending to make a gift here. Buyers can overpay if they wish or sellers can give buyers a good deal if they wish. Given the facts in this case there is no desire by anybody to make a gift and so no gift is involved.
Gill

Selling below market value is a gift:

https://www.avvo.com/legal-answers/can- ... 14941.html

This is a well-documented fact.

The IRS ran a nationwide crackdown operation on this in 2010.

[Gill]

The price is up to them. Sure, they could just use an appraised value. It's not going to be exact and if the house were put on the market, it would likely drop 10% between offer/acceptance, repairs, taxes paid and real estate agent fees. But the siblings could agree on any number. They could pull a number out of the air if they wanted to.

I don't think this is true.

I think you are legally (or by regulation) required to use the fair market value. If you want to do something different, then gifts are being exchanged and they should be documented as such.

I did a similar transaction. There were county rules about fair division based on market value. There were state taxes based on market value. There were representations to the IRS based on market value.

Perhaps you can get away with pulling a number out of the air, but it's not kosher.

There is no requirement that arm's length buyers and sellers use fair market value. Nobody is intending to make a gift here. Buyers can overpay if they wish or sellers can give buyers a good deal if they wish. Given the facts in this case there is no desire by anybody to make a gift and so no gift is involved.
Gill

Selling below market value is a gift:

https://www.avvo.com/legal-answers/can- ... 14941.html

This is a well-documented fact.

The IRS ran a nationwide crackdown operation on this in 2010.

I beg your pardon, but the link you cite is no authority for the proposition you state. Yes, selling below market value can be a gift when the intent is to make a gift. However, not every sale below market value is deemed to involve a gift. Depends on the facts and circumstances and the parties involved.
Gill

[MrsBDG]

CAsage wrote: ↑Mon Feb 11, 2019 2:42 pm
Note that if you get an offer, you are legally bound to sell so no fishing here!

Excuse me, what? I had my previous house on the market for some time and did not accept a number of initial offers.

It would be more accurate to say that if you get a full price offer you are, if not bound to sell, bound to pay the realtor commission and it's possible a buyer could have a case to force the sale.

Regarding the price, how about having all four siblings pay to fix the septic, depending how bad it is, you might not even be able to sell unless it is fully functional, then the other two can pay $200k. The roof, that's more iffy since it has a few years.

[CAsage]

Note that if you get an offer, you are legally bound to sell so no fishing here!

Excuse me, what? I had my previous house on the market for some time and did not accept a number of initial offers.

I was too vague. Yes, you don't have to accept offers. However, if a realtor brings you an offer for full price, you owe them the commission and cannot decline without paying them. Or, I think that's the case. Listing for fishing costs realtors their time, and you may owe for that....

[CAsage]

I still think the buyers here should account for the cost of selling. If that house actually sold for $200k (or now, $175k with bad roof and septic...), there are real expenses associated with selling, and all four would split those costs. The two siblings selling would not net 1/2 of the sales price. Similar to the buy-vs-sell spread in the stock market. It might be most fair to split that expense, perhaps discounting by 3% or 5%. Or just forget it, sell and buy another non-emotional rental property.

There are similar cases in divorces - Spouse keeps the house worth $100k, OtherSpouse gets $100k worth of cash. If you go sell that house, now you only have 90K. This is simply a valuation of what the property is worth in cash, not sales price.

[FIREchief]

This sounds like a disaster in the making. We're talking about a house worth $200K (max). Sell it, put the proceeds in the market and go and enjoy life!

[Dottie57]

Note that if you get an offer, you are legally bound to sell so no fishing here!

Excuse me, what? I had my previous house on the market for some time and did not accept a number of initial offers.

I was too vague. Yes, you don't have to accept offers. However, if a realtor brings you an offer for full price, you owe them the commission and cannot decline without paying them. Or, I think that's the case. Listing for fishing costs realtors their time, and you may owe for that....

I don’t think you owe the full commission, but can see out of pocket costs.

[CAsage]

Note that if you get an offer, you are legally bound to sell so no fishing here!

Excuse me, what? I had my previous house on the market for some time and did not accept a number of initial offers.

I was too vague. Yes, you don't have to accept offers. However, if a realtor brings you an offer for full price, you owe them the commission and cannot decline without paying them. Or, I think that's the case. Listing for fishing costs realtors their time, and you may owe for that....

I don’t think you owe the full commission, but can see out of pocket costs.

Depends on the contract you signed with the realtor. I think you might! As always - check the contract.

[Freetime76]

Do business with your head, not your heart!

Broken Man 1999

Ditto. You can’t assume the others see or agree with your perspective. We all swim in our own fishbowls.

Several issues with this from the start:
1. A sentimental property is going to be used as a rental. How will you feel when your renter trashes it?
2. Multiple parties will co-own. What about spousal opinions? The next generation?? Future marriages/divorce?
3. No discount for not having to list (10% - or are you giving charity to family..I get being generous, however at this point you already have an issue of over value).
4. Your sellers have a distorted value assigned to the property in their heads. I believe this is called anchoring?? Or The endowment effect.
An appraisal is just a number. Try selling that place on the market, disclosing known issues of course, and they will receive less. Plus, people are going to do their own inspections, and repairs may be required to sell (money out of pocket).

IMHO, do not do the deal. Sell on the open market. If/when you get an offer, put in a competing offer if you have second thoughts. Otherwise, buy it, no matter the price, and acknowledge to yourself that this is for personal reasons and not a good investment...

Sorry, I I know that it’s messy. I had a similar situation with a sister who felt our fathers house was worth much more than it actually was. It was simple things, like feeling that a small two car garage was a four car garage, the condition of the house was better than it actually was etc. etc. It was not possible to change her mind, no matter the facts/evidence. There are just too manny emotions involved.

[LilyFleur]

Selling the house and splitting it four ways is definitely the cleanest way, but unfortunately, there is some sentimental value to keeping the house.

Two sibling owners, with "sentimental value" involved in an investment property. You need a written agreement specifying when and how the partnership will terminate.

+1
Recently heard a horror story about two siblings that owned an inherited property together. Circumstances change.

[168gr]

This is insanity. Get out of this deal now.

If you want an investment property, buy one based on math that supports the notion that it's a good investment. You've "picked" this property based on circumstance and sentimental value and it's already heading the direction of a money pit.

As a bonus, you've got some irrational family warfare brewing in the background.

Get out before it ends in tears and ruin.

[donall]

You are thinking of renting out an out of state house that you are sentimental about. Sell this house if you can.

[shiftleft]

Nothing tears a family apart like deciding how to split an inherited rental property. I've seen it many times and even between siblings that used to get along great with each other. Suggest you just sell the property and be rid of it. Parents that want to pass on their property to their children after death, I suggest you leave instructions to immediately sell it, and divide up the proceeds. Otherwise, you're just setting up a family feud.

[VaR]

I'll add my voice to those saying that your partner's family should sell the property and split the proceeds. It sounds like there's not enough generosity between the family members to make this work out no matter what the outcome is. Even if you partner and the other buying sibling pay the higher price (which I think is unfair), the other siblings will resent any future benefit from the property.

Just out of curiosity, why do the two selling siblings want to sell the property? I would have thought the default bad idea would be for all four of them to co-own the property as a rental?

[tibbitts]

I don't understand a home being both an investment property and being held for sentimental reasons.