Should I buy the family cottage?

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alfredwallace
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Should I buy the family cottage?

Post by alfredwallace » Fri Nov 08, 2019 8:26 am

My father owns the family cottage which he inherited from my grandmother. He bought out his brothers at a deep discount after my grandmother’s death and he is now 82 years old and doesn’t want to deal with the upkeep. He wanted to pass the cottage down by selling it to one or more of his children at a similar steep discount similar to what he got when he purchased it. He is willing to sell it for about 150K. The home is worth between 400-500K. Out of his four children, my brother is in zero financial position to buy anything. One of my sisters doesn’t want it because she lives 20 minutes away. My other sister is interested but after two divorces doesn’t want to buy at that price but would consider sharing it with me. My sister who is interested in the property is a bit of a control nut and sometimes makes questionable financial decisions. My dad would actually prefer selling to one kid since it keeps it in the family and removes all the problems associated with co-ownership. The question is should I offer to buy it? I posted earlier about sending my kids to college and gave a short version of my finances, but to recap here, I make 84K a year and my wife makes about 38K. I'm 50 and my wife is 47. I have an 11 year old and 13 year old. They each have about 21K saved in 529 plans and I contribute an additional $200 to each of their accounts monthly and throw in additional funds when I have it. If the market returns about 5%, I'm anticipating we'll have about 50K saved per kid in each plan. Our annual baseline living expenses are about 50K a year and between employer contributions and our own, we save about 28% of our gross income. We have no debt other than a mortgage that will be paid off two months before my son is scheduled to start college in five years. My wife has about 58K saved in a Roth IRA and I have an additional 80K saved in a Roth. The rest of our retirement is tied up in 403Bs. Between the Roth and 403b tax-deferred, as of today we have 1.146 million saved in retirement and an additional 94K in short term "emergency" funds. Of the emergency funds, we have 30K in checking and short term savings, another 36K in VFIAX and another 30K in VMMXX.

My kids have the option to attend the liberal arts college I work at for free and could commute since it is only 2 miles down the road so they have an essentially free four-year college option with 50k each available. The annual costs for the cottage is about 4.5K in taxes (no HOA fees) and probably another 3K in maintenance costs annually (just guessing). My dad is intense about his home upkeep so there is zero deferred maintenance. In fact he just put in new windows, vinyl siding (it was completely rebuilt from the foundation in 1996) and it literally has two roofs to handle the snowfall (it's in Northern Michigan). It is furnished, includes a dock, ski boat, boathouse etc. I view this as less of an investment than a family heirloom since I have no intention of selling it but just passing it on to my kids—who love the place. My siblings would probably be staying there from time to time so renting it probably would be intermittent at best, but possible. My wife and I could stay there for 2-3 months in the summer due to our current jobs and maybe a month in the winter. None of my siblings have similar jobs that would allow for that.
Purchasing the cottage (2500 square feet) would potentially put a crimp in the retirement savings and/or kid’s 529 plans. We were planning on buying a lakehouse in the area when we were going to retire anyway but wouldn’t choose to buy one now given a choice. I’m just curious who would buy it if they were in my position now? If so how would you finance it? Home equity loan? Bleed off a Roth? Drain some emergency savings? I should point out that as a tenured full professor, the odds of me getting fired is very low. Is this a financial albatross or once in a lifetime opportunity? If none of my siblings want to buy it, he’ll put it up for sale and keep the money in case he needs it for nursing home care. He told me multiple times that he doesn’t need any money for it. He’s in great shape financially. I've been going to this place since I was born so it has a lot of sentimental value to me. Thanks for your advice.

daheld
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Re: Should I buy the family cottage?

Post by daheld » Fri Nov 08, 2019 8:30 am

Buy it. Don't look back. It's worth it.

sheepla
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Re: Should I buy the family cottage?

Post by sheepla » Fri Nov 08, 2019 8:34 am

Yes, buy.

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LiveSimple
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Re: Should I buy the family cottage?

Post by LiveSimple » Fri Nov 08, 2019 8:35 am

if this is within the family and you can afford, just buy and enjoy, you will not regret.

You can pass along to your next generations as well

fru-gal
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Re: Should I buy the family cottage?

Post by fru-gal » Fri Nov 08, 2019 8:36 am

Buy it. I would get a loan instead of taking money out of a Roth. I would also own it 100% and let the siblings (responsible ones) stay in it occasionally.

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RickBoglehead
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Re: Should I buy the family cottage?

Post by RickBoglehead » Fri Nov 08, 2019 8:38 am

First, "he told me" is worthless. Is he really able to live out his years, including possible years of nursing care, with his other assets?

Second, we inherited my in-law's cottage, on a lake in Michigan, roughly 70 years old (could be older). You have some big issues here.

- you are GUESSING at maintenance costs. An old home, located on a body of water, will have issues, I promise you.

- you stated that you were thinking of buying a home on a lake to retire on, then decided if you had a choice, you now would not. Now, you're thinking of doing it again, because you have no choice?

- Renovations in 1996? That's 24 years ago. That tells you nothing about the possibility of current issues.

- Zero deferred maintenance that you know about. With our 70+ year old inherited cottage, we discovered that while my FIL fixed things that broke, he did nothing to things that had not broken. And, we discovered that some of his repairs caused considerable damage, i.e. the cutting of a beam to install plumbing.

If it were me, here is how I would evaluate it:

1) Would you buy this, to keep (i.e. not buy and dump for a profit), IF it was not your father's cottage?

2) How will this set with your 3 siblings? Why would they not think it should be sold, at market price, and then the funds go to your father and then his estate (them)?

3) If buying is still going to happen, you should hire a home inspector and insist on a total examination of the entire structure, including the underside.

Edit - we spent two full summers, and part of a third, removing my FIL's crap from the cottage and boathouse. We then started to enjoy it - until record high water this past summer required us to build dikes. We long ago decided we would not retire there - a lake in rural Michigan is usable 4-5 months - and we'll retire in a warmer climate. We will be selling it in 2020, hope to have that done before summer begins.
Last edited by RickBoglehead on Fri Nov 08, 2019 8:50 am, edited 1 time in total.
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Emilyjane
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Re: Should I buy the family cottage?

Post by Emilyjane » Fri Nov 08, 2019 8:46 am

I’d say buy it, no advice on $ issues.

If your kids love it, it’s irreplaceable. And your dad caring well for it, awesome. My husband bought family cottage from his parents; has been great experience. I second your dad’s thought that best to avoid co-ownership if possible. It complicates things. You might be interested in the book, Saving the Family Cottage. It has multiple descriptions of difficulties with co-ownership.
"Real knowledge is to know the extent of one's ignorance", Confucius

Dottie57
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Re: Should I buy the family cottage?

Post by Dottie57 » Fri Nov 08, 2019 8:47 am

I agree with getting the cottage inspected by a very thorough and good inspector. You need too know this.

Don’t buy with any siblings. If condition is acceptable and you truly want it, buy it.

FrugalConservative
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Re: Should I buy the family cottage?

Post by FrugalConservative » Fri Nov 08, 2019 8:48 am

Easy decision.
Buy it. Make your dad happy and its a solid financial decision on your end.

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djpeteski
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Re: Should I buy the family cottage?

Post by djpeteski » Fri Nov 08, 2019 8:54 am

Here are my thoughts:

1) I would buy the property. I would also rent to my siblings, but at a deep discount. You can look at the property on zillow, and get a decent appraisal, or contact a RE agent. Then if your dad sells to you at 30% of market value then I would rent at 30% of going rate. This will help with the maintenance.

2) I would sacrifice kids college contributions before anything else. First you do not need 100% of college costs saved up prior to them starting. You can cash flow costs or even withdraw from Roth at that time. You may not even need to withdraw. Given that your mortgage will be paid off prior to your oldest starting college that makes cash flow an even better idea.

HomeStretch
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Re: Should I buy the family cottage?

Post by HomeStretch » Fri Nov 08, 2019 8:58 am

Buy it as a sole owner if you want to do so.

The only thing that would give me pause (if it were me) would be the steep discount and its affect on father’s future finances and impact on siblings especially on the sibling willing to co-own. Consider paying full market price to avoid family issues.

Topic Author
alfredwallace
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Re: Should I buy the family cottage?

Post by alfredwallace » Fri Nov 08, 2019 9:08 am

Let me address some of your comments/questions below. Hopefully that will clarify things.--embedded in your quote with bold text.
RickBoglehead wrote:
Fri Nov 08, 2019 8:38 am
First, "he told me" is worthless. Is he really able to live out his years, including possible years of nursing care, with his other assets?

He named me executor to his estate. I have pretty good knowledge of his finances. His social security checks alone cover more than his basic expenses but he also has a state pension, another 300K of outside investments and his wife (my step-mother) has another 800K in investments. He also has long-term care insurance so I believe him.

Second, we inherited my in-law's cottage, on a lake in Michigan, roughly 70 years old (could be older). You have some big issues here.

- you are GUESSING at maintenance costs. An old home, located on a body of water, will have issues, I promise you.


The home was originally built in the 1940s as a cabin but demolished except the concrete pad and chimney and then rebuilt as new in 1996. I know exactly what the maintenance history is on the place as well as any and all problems it is prone to because I've been going up there every summer for the past 50 years. I was often next to my dad with a hammer or a shovel for every repair or redone septic system.

- you stated that you were thinking of buying a home on a lake to retire on, then decided if you had a choice, you now would not. Now, you're thinking of doing it again, because you have no choice?

I was thinking about it now mostly because once this property is sold, I wouldn't have a chance to buy it again at this price. This is like buying a house for 75% off of retail but the sale ends at some point. That's what makes me rethink buying. If he offered it at 500K or 450K I wouldn't even consider it.


- Renovations in 1996? That's 24 years ago. That tells you nothing about the possibility of current issues.

It was more than a renovation. It was bulldozed and rebuilt. Only the fireplace and concrete pad are original and even those were redone.

- Zero deferred maintenance that you know about. With our 70+ year old inherited cottage, we discovered that while my FIL fixed things that broke, he did nothing to things that had not broken. And, we discovered that some of his repairs caused considerable damage, i.e. the cutting of a beam to install plumbing.

I know all the maintenance on this place. I've opened and/or closed the property with my dad for about 20 of the 50 years I've been going there. Obviously home problems can come up at any time but I know where most of the bodies are buried. I know where nonfunctional dry wells are. In fact I know this properties history far better than the home I'm currently living in (which is the same age--1996).

If it were me, here is how I would evaluate it:

1) Would you buy this, to keep (i.e. not buy and dump for a profit), IF it was not your father's cottage?

Not at full market appraisal because I couldn't afford it but at 150k and the best chance to keep it in the family? Maybe. Two of my three siblings have strong attachments to the place as well--probably even stronger than mine, but can't afford it.

2) How will this set with your 3 siblings? Why would they not think it should be sold, at market price, and then the funds go to your father and then his estate (them)?

If it were sold then they could never go there again. That's their motivation. I would offer a first rights to purchase at a discount to my siblings if I ever were in a position to need to sell it so there would be no chance of me flipping it for a large gain. I'd be willing to sign a contract to that effect drawn up by a lawyer. If I don't sell it, then I would specify that my kids got the property after I was gone. They're cousins would probably come a visit because that's what's been going on there since the 1940s.

3) If buying is still going to happen, you should hire a home inspector and insist on a total examination of the entire structure, including the underside.

I know the underside because I literally helped my dad enlarge the crawl space under the house in 2004. As I mentioned, I know this place pretty well because I've put my own sweat into it too.That being said, I'll definitely go over all the maintenance details again with my dad.
I hope my embedded comments helped clarify a few things. Your raise some interesting and important points by asking if I'd buy it if it wasn't the family cottage. Good question. The sentiment and value of the place is tied up in the memories for me. Some of my mother's ashes are literally on the property and my father named all the roads in the area. There are six other cottages on the lake that belong to my relatives. Even with all that though, I'm extremely practical with money and pretty conservative too and it is because of the emotional sentiment that I'm posting here to make sure purchasing this wouldn't be crazy. I'm not sure how I would feel if I were never able to go there since that's never happened in the 50 years I've been alive. I'm afraid that I'd regret it but it would be too late. At the same time, I don't want to financially compromise my family.

HeelaMonster
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Re: Should I buy the family cottage?

Post by HeelaMonster » Fri Nov 08, 2019 9:10 am

We had a nearly identical situation with our family vacation cottage, on a lake in Northern MN. Aging parent no longer able to care for the place but wanting to keep in family. Four siblings, with varying degrees of financial wellbeing, distance, etc, etc.

The cottage was sold to the one in best position to pay for it, use it and maintain it. That has worked out well. I would NOT recommend "shared ownership." The others can presumably still use it, through some arrangement with single owner. I'll join the chorus saying buy it.

The one caveat is to give some thought to the issue raised above, if others will feel cheated in some way by the steep discount. In our case, the property was sold at something approaching (but still less than) market value. Even still, there was the potential for the other three siblings to wonder "Why did Alfred get such a sweetheart deal?" In the end, it worked out fine, but at least be sensitive to that possibility.

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Watty
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Re: Should I buy the family cottage?

Post by Watty » Fri Nov 08, 2019 9:28 am

A big question is if your dad will be financially OK if he lives to be 105 and needs to live in assisted living and nursing homes for many years.

The next big question since he would be selling it to you for around $300K below market value then that might cause a lot of strife with your siblings if that $300K does not come out of your share of his estate. This could cause problems with both the siblings who are also interested in the house and the ones who are not as financially secure. Even if he has a large enough estate now that your share would be over $300K and could cover this then by the time he and your stepmom both die the estate might not be as large. Siblings have become estranged over a lot less money than this.

Yet another problem is that there can be unexpected life events. For example you could buy it then next year you could die or come down with a life changing illness that would make having the house impractical. What would happen to the house then?

I have seen weird stuff happen, you could die then your wife might remarry. If she then dies then her second husband might end up with the house. It was a long story I have actually seen something like that happen where the second husband ended up with couples seven figure estate, that he then left to his kids from a prior marriage and the couples kids got nothing.

If your Dad wants to keep the house in the family then he should talk to a lawyer who specializes in elder care law about what the options are.

I have heard of people putting houses like that into a family trust but that is also not ideal since handling the maintenance costs is tricky and future generations may move away or not be interested in using the house much. Making any big decisions about the house is also complicated since you may need to get 40 great-grand-kids who have a small interests in the house to agree to the decision.

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alfredwallace
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Re: Should I buy the family cottage?

Post by alfredwallace » Fri Nov 08, 2019 9:37 am

HeelaMonster wrote:
Fri Nov 08, 2019 9:10 am
We had a nearly identical situation with our family vacation cottage, on a lake in Northern MN. Aging parent no longer able to care for the place but wanting to keep in family. Four siblings, with varying degrees of financial wellbeing, distance, etc, etc.

The cottage was sold to the one in best position to pay for it, use it and maintain it. That has worked out well. I would NOT recommend "shared ownership." The others can presumably still use it, through some arrangement with single owner. I'll join the chorus saying buy it.

The one caveat is to give some thought to the issue raised above, if others will feel cheated in some way by the steep discount. In our case, the property was sold at something approaching (but still less than) market value. Even still, there was the potential for the other three siblings to wonder "Why did Alfred get such a sweetheart deal?" In the end, it worked out fine, but at least be sensitive to that possibility.
This I see as the biggest potential issue but curiously that isn't what has come up. As I indicated above, I would offer to sign an agreement not to sell the property at full price unless the excess was split among my siblings and if I wanted out, I would offer first rights to purchase at a similar discount point to my siblings. If it stays in the family and I continue to pay for maintenance and taxes, then my kids would inherit it. I would have pretty generous stay policies for my siblings so that they could stay over for weekends when I wasn't there (or even when I was!--there's quite a bit of room) as long as nobody was living in the property full time or staying in the winter. I was considering even paying my financially disadvantaged brother some funds for caretaker duties when I wasn't there. This arrangement would allow all of my siblings some access to the property without the financial liabilities but it would also allow me better control without some of the problems of co-ownership. That's my hope here. The current problem is that none of my siblings or myself are dripping with cash but we would all be very sad to see the property sold. My dad really looks at me as the person to buy it because we talk about finance issues at some length. I think he thinks this might be a way out too.

NotWhoYouThink
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Re: Should I buy the family cottage?

Post by NotWhoYouThink » Fri Nov 08, 2019 9:43 am

Run away. Run far away. Run fast.

You can't afford this house, the upkeep, utilities, and insurance and still keep your retirement funded, especially since you don't plan to sell it or your current house. And your siblings will feel entitled to use it whenever they want, and they won't feel one bit grateful to you, they'll feel you owe it to them.

Keep your warm family memories of the house, offer to help manage the property for your father as a rental, but don't ruin your financial and family situation by buying it.

aristotelian
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Re: Should I buy the family cottage?

Post by aristotelian » Fri Nov 08, 2019 9:44 am

One issue I see is that buying at such a steep discount effectively reduces potential inheritances for your siblings. This could cause a problem, especially with the one who is interested in the property. However, paying full price seems like too big of a stretch for any one of you. Would you be willing to give up an equivalent portion of investment assets when the time comes?

I am not totally clear whether you actually want this property. It seems like a great deal, so if you want it you should certainly buy it. If you would only be buying it out of a sense of responsibility I think you should walk away.

If sister wants it, maybe you could help her purchase it rather than purchasing it yourself.

dziuniek
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Re: Should I buy the family cottage?

Post by dziuniek » Fri Nov 08, 2019 9:51 am

Meh, buy it, sell it, pay for college.

a_movable_life
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Re: Should I buy the family cottage?

Post by a_movable_life » Fri Nov 08, 2019 9:54 am

Watty wrote:
Fri Nov 08, 2019 9:28 am

The next big question since he would be selling it to you for around $300K below market value then that might cause a lot of strife with your siblings if that $300K does not come out of your share of his estate. This could cause problems with both the siblings who are also interested in the house and the ones who are not as financially secure. Even if he has a large enough estate now that your share would be over $300K and could cover this then by the time he and your stepmom both die the estate might not be as large. Siblings have become estranged over a lot less money than this.
I think most of the key issues have been covered since this topic comes up about 3-4 times a year here.

If I was given the Family House at a 1/3 Million Dollar discount I could see my Sister and BIL being "Concerned." Like the above quote, and in "Beyond the Grave" the Author talks about a 300K gift now, and a 300k inheritance somewhere from 5-15 years from now are not the same. We've seen from other posts here that the less successful siblings are "Keeping score" very closely.

I also agree on split ownership being challenging. One family always uses it more, and one family always ends up doing more repairs, or putting more money in. Especially if the siblings are not of equal means.

There could also lead to resentment if the OP chooses to charge rent for use, even at a discounted rate. My Uncle had a Ski House we used in the Summer for vacations and I know he did not charge my Mom and Dad.

You may encounter pushback if you decide to rent it since that would limit access by the siblings, or if you need to sell it.

SQRT
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Re: Should I buy the family cottage?

Post by SQRT » Fri Nov 08, 2019 10:01 am

Seems like a no brainer assuming you and your kids would enjoy it and it won’t cause family “issues”. Maintenance will probably be more than you think. Our cottage requires constant repair. They are, after all, wooden structures out in the woods, slowly rotting away. But the family experience will be priceless. I wouldn’t even consider sharing with siblings for all the obvious reasons. Go for it.

260chrisb
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Re: Should I buy the family cottage?

Post by 260chrisb » Fri Nov 08, 2019 10:07 am

Well first, him selling you a house valued at 400-500K for 150K will likely piss off the other siblings and create long term resentment even if they can't afford it or are not interested unless Dad has set aside inheritance for them. He's kind of giving you 200-300K although you have costs associated with ownership. You're doing well for your ages but I wouldn't compromise retirement money for it especially at current mortgage rates. Refi your mortgage to a 15 year and buy it. Keeping it in the family is great but ultimately it's your property. I've lived on a lake for most of my adult life and have seen every kind of nightmare scenario there is as it relates to these situations so proceed with openness and caution but do it.

daheld
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Re: Should I buy the family cottage?

Post by daheld » Fri Nov 08, 2019 10:11 am

NotWhoYouThink wrote:
Fri Nov 08, 2019 9:43 am
Run away. Run far away. Run fast.

You can't afford this house, the upkeep, utilities, and insurance and still keep your retirement funded, especially since you don't plan to sell it or your current house. And your siblings will feel entitled to use it whenever they want, and they won't feel one bit grateful to you, they'll feel you owe it to them.

Keep your warm family memories of the house, offer to help manage the property for your father as a rental, but don't ruin your financial and family situation by buying it.
OP has a million dollars saved for retirement and 15 years left to work! His current mortgage will be paid off in 5 years. This is alarmist nonsense.

averagelonghorn
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Re: Should I buy the family cottage?

Post by averagelonghorn » Fri Nov 08, 2019 11:53 am

I'm going to join the majority of replies and say buy it.

Probably getting a mortgage is best, rather than tap too much into other funds, except for down payment. Interest rates are pretty low.

Almost none of the reasons are financial, they're almost all sentimental; but sometimes sentimental reasons are actually persuasive... and the major ones here to me are:
-- You've been going there for 50 years.... you'll miss it if you can't do that any more, so will your siblings and their families.
-- Your kids are prime ages where they'll enjoy going there for the next few years. (Then they'll be teens and want nothing to do with you for a while, then someday, they'll want to spend time with you there again.)
-- You can and likely will actually use the place, especially with your summers off, so you won't feel like its going to waste.

Financial-wise; it's a good deal for you; and of course your dad could get more selling on the open market. But it sounds like its important for him that this stay in the family; and sounds like you're the best option. If it comes to a point where you can't afford to keep it, expenses get out of hand, you end up moving to warmer climes in your retirement, you can always sell it down the line.

I wouldn't commit to first right of refusal or anything like that in writing... you can tell siblings that is your intent, but that it's subject to change depending on circumstances at the time.... they really should understand that.

My wife and I bought a lake house several years back; on the thought that we might as well enjoy it now rather than wait until we retire.... It was a surprisingly well kept up foreclosure; so we got a deal. Yes, its entirely a luxury, we think its worth it.

We have pretty much a "First Come/ First Served" policy where family and close friends are welcome to use the place. We decided not to charge rent or rent it out to anyone else; If we asked them to kick in a little for utilites or whatever, they probably would.... they have helped out with re-decking the dock and some spring cleaning type stuff, and always offer to do more.

jimmo
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Re: Should I buy the family cottage?

Post by jimmo » Fri Nov 08, 2019 11:55 am

Buy it. Absolutely, buy it. And purchase as sole owner to avoid sibling quarrels.

Your kids love it. It's close by. You have a lifetime of memories there. Someday you can play with your grandkids there.

You are financially in great shape. If for any reason you fell on hard times, you could always sell and sell for sizable profit given the discounted purchase price, but obviously that's not the intent.

My grandpa's family "farm" was sold several years back and I still wish the timing had been right for me to purchase. The farmland itself was rented to a nearby farmer and there was no livestock, so there was no actual farming happening there. But beyond the farmland there was 5-10 acres on the homestead that included a pond, large workshop, orchard, large yard, small woods and beautiful views. I spent many a Saturday there in my youth swimming in the pond, playing beach volleyball, ice skating and pond hockey in winter, helping with mowing, splitting firewood and so on. Anyhow, the property was sliced and diced for sale in various parcels. The old home with all its character (and creaks) was bulldozed down by the new owner and replaced with an ugly McMansion. That's progress I guess.

Anyhow, buy the family cottage. Enjoy the heck of it and then pass it on to your kids someday.

Clarice
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Re: Should I buy the family cottage?

Post by Clarice » Fri Nov 08, 2019 11:57 am

Yeah buy it - that would be cool.

123
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Re: Should I buy the family cottage?

Post by 123 » Fri Nov 08, 2019 12:41 pm

The property may be worth $500K and dad will sell it to you for $150K. So you are getting an advance "inheritance" of $350K. This strikes me as a source of potential family strife on an on-going basis. Sure you've rationalized it as a means of keeping the cottage in the family and maybe you'll be a hero (in somebody's eyes) for that.
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harvestbook
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Re: Should I buy the family cottage?

Post by harvestbook » Fri Nov 08, 2019 12:57 pm

I bought the "family beach house" for a "steep discount" and ended up spending a lot of time and money on renovations. The work was enjoyable, but it's been 10 years and every trip there ends up with at least a day of work just maintaining it, much less finishing up the final touches. The family loves to stay there for free without doing any work, while I foot the bill for mowing, utilities, taxes, insurance, etc. Pretty sweet deal for them.

The worst part is, when we have a window for a vacation, it's usually, "Well, we better go check on that place." The end result is we very rarely get to take vacations anywhere else. And it's set back my retirement at least two years, and I don't really have the option to sell it due to emotional reasons (the emotions of others, not mine.)
I'm not smart enough to know, and I can't afford to guess.

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JoeRetire
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Re: Should I buy the family cottage?

Post by JoeRetire » Fri Nov 08, 2019 1:04 pm

alfredwallace wrote:
Fri Nov 08, 2019 8:26 am
My father owns the family cottage which he inherited from my grandmother. He bought out his brothers at a deep discount after my grandmother’s death and he is now 82 years old and doesn’t want to deal with the upkeep. He wanted to pass the cottage down by selling it to one or more of his children at a similar steep discount similar to what he got when he purchased it. He is willing to sell it for about 150K. The home is worth between 400-500K.
So what would your siblings get if you buy the house?

You would be getting a $400-500k home for $150k. What do they get?
Don't be a lemming.

gogleheads.orb
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Re: Should I buy the family cottage?

Post by gogleheads.orb » Fri Nov 08, 2019 1:14 pm

If you want to retire there buy it outright. If you just want to use it occasionally and never full time, buy it with as many siblings as possible, so that all of the running costs can be shared. If your siblings use it but don't pay for it you will resent them.

gogleheads.orb
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Re: Should I buy the family cottage?

Post by gogleheads.orb » Fri Nov 08, 2019 1:17 pm

the price you pay is up to you and your father. He can do whatever he wants with it. It is his. I guess he does have the responsibility to explain this to your siblings if they have problems with it.

MathWizard
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Re: Should I buy the family cottage?

Post by MathWizard » Fri Nov 08, 2019 1:41 pm

I'm in a similar financial situation as you, and I would buy it.

In a way, you are taking on the mantle of the family conservator of the property, which is
why your dad is offering it to you at a deep discount.

I'm sure he bore the burden for years, now he is hoping to be relieved of the burden.
He would probably keep it if you do not buy it.

Dealing with siblings is the trickiest part. They will feel like it is theirs, even though you paid for it.
I'd work out the details of how this would work before purchasing. Rent, upkeep, etc. who gets to use it
and how decisions are made. (You don't want to be the referee when 2 of them want to use the cabin on
July 4th weekend.)

You might want to just say that you will invite some of them to visit in YOUR lakehouse when you are there,
but not otherwise.

Just a note, you say this is the family cottage. It is your dad's (and mom's?) cottage right now, not the family
cottage. It will be yours when you buy it. maybe it will be you and your wife's and kids cottage when you buy
it but it will not be your siblings. If this does not make sense to you and your sibling, I would not buy it.

Yooper
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Re: Should I buy the family cottage?

Post by Yooper » Fri Nov 08, 2019 2:20 pm

alfredwallace wrote:
Fri Nov 08, 2019 8:26 am

(it's in Northern Michigan).

If none of my siblings want to buy it, he’ll put it up for sale and keep the money in case he needs it for nursing home care. He told me multiple times that he doesn’t need any money for it. He’s in great shape financially.

I'll buy it now. By next spring any controversy will have dissipated and all will be forgotten. I'll sell it to you in June (for the price I paid). All I ask is that I and my family get to use it one week in the summer of 2020. If you agree, I'll even let you use my deer blind the first week of deer season next year!

Seriously, just buy the thing. If you don't, you'll never forgive yourself.

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Re: Should I buy the family cottage?

Post by michaeljc70 » Fri Nov 08, 2019 5:01 pm

$500k cottage? As others said, financially it makes sense to buy a $400-500k home for $150k. I'd be worried about how the rest of the family might feel though. Would they be getting something else in place of the discounted cottage? I'd also worry that they think it is still the "family" cottage and can use it whenever they want. Depends on how your family members are.

GoldenFinch
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Re: Should I buy the family cottage?

Post by GoldenFinch » Fri Nov 08, 2019 6:23 pm

I would absolutely buy it.

wanderer
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Re: Should I buy the family cottage?

Post by wanderer » Fri Nov 08, 2019 7:43 pm

Be careful and realistic. As other have said, annual cost of ownership and upkeep can be costly in both time and money. Annual cost for a cottage by the lake is likely 3-4%/year of it's value - that is 12-20K (personal experience). Most weekends at the cottage will be doing the usual household chores - cleaning, mowing, minor repairs, with some time to play. The price might be "right", but sounds like you are interested in your childhood family memories, not earning a fast buck. Be sure that you, and your personal family, want to make the commitment to owning a "lake house".

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RickBoglehead
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Re: Should I buy the family cottage?

Post by RickBoglehead » Fri Nov 08, 2019 8:13 pm

harvestbook wrote:
Fri Nov 08, 2019 12:57 pm
I bought the "family beach house" for a "steep discount" and ended up spending a lot of time and money on renovations. The work was enjoyable, but it's been 10 years and every trip there ends up with at least a day of work just maintaining it, much less finishing up the final touches. The family loves to stay there for free without doing any work, while I foot the bill for mowing, utilities, taxes, insurance, etc. Pretty sweet deal for them.

The worst part is, when we have a window for a vacation, it's usually, "Well, we better go check on that place." The end result is we very rarely get to take vacations anywhere else. And it's set back my retirement at least two years, and I don't really have the option to sell it due to emotional reasons (the emotions of others, not mine.)
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Re: Should I buy the family cottage?

Post by BolderBoy » Fri Nov 08, 2019 9:03 pm

123 wrote:
Fri Nov 08, 2019 12:41 pm
The property may be worth $500K and dad will sell it to you for $150K. So you are getting an advance "inheritance" of $350K. This strikes me as a source of potential family strife on an on-going basis. Sure you've rationalized it as a means of keeping the cottage in the family and maybe you'll be a hero (in somebody's eyes) for that.
These are precisely my concerns as well.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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celia
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Re: Should I buy the family cottage?

Post by celia » Fri Nov 08, 2019 9:06 pm

I see this as a family issue, rather than a financial issue. Sure, if you were buying it from a co-worker or friend, you could make a lot of money by selling it after a few years without having any hard feelings.

But this is family. Your dad got it for a good deal, instead of his siblings. Sure, you might also get it for a good deal. But where will this end in the future? Will one of your kids be expected to get a good deal on it, while their cousins never had a chance to own it or your kids' aunt and uncles? Why will one branch of the family end up with more than the other branches, just because one person in each generation was able to buy it at a steeply discounted price?

It seems like you would be prepetuating the problem for future generations. Where will it (and possible hard feelings) end?

I'd sound out other relatives. It seems it would be fairer to everyone to sell to a stranger after your dad dies and distribute the proceeds accordingly to many relatives.

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TxAg
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Re: Should I buy the family cottage?

Post by TxAg » Fri Nov 08, 2019 10:00 pm

If it's worth $500k and you're getting it for $150k, I'd enjoy it for a few years then flip it.
Last edited by TxAg on Fri Nov 08, 2019 10:05 pm, edited 1 time in total.

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TxAg
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Re: Should I buy the family cottage?

Post by TxAg » Fri Nov 08, 2019 10:04 pm

dziuniek wrote:
Fri Nov 08, 2019 9:51 am
Meh, buy it, sell it, pay for college.
Best answer

Wenonah
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Re: Should I buy the family cottage?

Post by Wenonah » Fri Nov 08, 2019 10:18 pm

BUY IT! We did not buy the family cabin in the northwest on 15 acres on a wild river because we were being cheapskates and worrying about upkeep, and we regret it now. Long story. We should have hired a caretaker. Absolutely buy it. You can rent it to friends or use as a VRBO, or whatever.....buy it!

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JoeRetire
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Re: Should I buy the family cottage?

Post by JoeRetire » Sat Nov 09, 2019 8:20 am

alfredwallace wrote:
Fri Nov 08, 2019 9:08 am
He named me executor to his estate.
Yikes. Even more red flags.

You are executor. And you are getting a below-market deal for part of his eventual estate. What do your siblings think about all of this? what does his wife think of this?

Of course it's his money and his estate. But giving away $250 - 350k of it to his future executor... hmm.

I know of one family in a similar situation. The daughter got the "family lake house" when the parent couldn't go there any longer. The parent changed his will to reduce the daughter's inheritance by a portion of the market value of the house, so that the siblings (who didn't get the lake house) were not diminished by this transaction. The family all felt good about this.
Don't be a lemming.

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Re: Should I buy the family cottage?

Post by fru-gal » Sat Nov 09, 2019 8:44 am

wanderer wrote:
Fri Nov 08, 2019 7:43 pm
Be careful and realistic. As other have said, annual cost of ownership and upkeep can be costly in both time and money. Annual cost for a cottage by the lake is likely 3-4%/year of it's value - that is 12-20K (personal experience). Most weekends at the cottage will be doing the usual household chores - cleaning, mowing, minor repairs, with some time to play. The price might be "right", but sounds like you are interested in your childhood family memories, not earning a fast buck. Be sure that you, and your personal family, want to make the commitment to owning a "lake house".
The OP, with his experience with the house repairs, his Dad's finances, can figure out the annual cost. I have a house at a cove. The property taxes, which are very high here, run me $10K a year for a house and land valued at about $350,000. I am not sure how insurance costs would work as for the OP it's a second house whereas mine is my only house.

Off the top of my head, normal maintenance including lawn mowing, etc. costs about $2k a year. The big maintenance costs like exterior painting and a new roof are years apart. Perhaps the siblings who get to stay can help with the painting if the house is not too tall, so that's only the cost of the paint.

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Re: Should I buy the family cottage?

Post by Sconie » Sat Nov 09, 2019 9:02 am

I'd buy it. In terms of handling family "resentment," I would be prone to discuss with your Dad-----having your Dad-----inform your siblings that it is your intention to buy it and to hold on to it (keep it in your family)----what the price is that you are going to pay----and that is what is going to happen unless one of them step-forward within the next 30 days with another, better, offer.
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan

dekecarver
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Re: Should I buy the family cottage?

Post by dekecarver » Sat Nov 09, 2019 9:16 am

At that price I'd buy and would do so only as the sole owner. You have to figure though you will bare 100% of all maintenance/repair/tax and headache costs, so family use/access will be based on your kind heart and wanting to maintain those relationships; if you can accept those factors, enjoy.

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Re: Should I buy the family cottage?

Post by HomeStretch » Sat Nov 09, 2019 9:31 am

*If* your intention as owner of the family cottage would be to limit/stop siblings’ use or to ask them to pay rent or help out with maintenance/costs, suggest you discuss this with Dad prior to purchase. Part of dad’s reason for offering you a $250k-$350k discount could be to keep this sentimental property accessible for use by the whole family (rather than as a 2nd personal residence for you) and he sees the discount as a way to underwrite your maintenance costs as a “property steward” over your generation’s lifetime of use.

It’s also a good time (pre-purchase) to ask Dad how he feels about you *possibly* selling the property in the future.

Clemblack
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Re: Should I buy the family cottage?

Post by Clemblack » Sat Nov 09, 2019 10:04 am

I think it would be unfair to your siblings if you buy it at such a steep discount.

Retired2013
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Re: Should I buy the family cottage?

Post by Retired2013 » Sat Nov 09, 2019 10:20 am

michaeljc70 wrote:
Fri Nov 08, 2019 5:01 pm
$500k cottage? As others said, financially it makes sense to buy a $400-500k home for $150k. I'd be worried about how the rest of the family might feel though. Would they be getting something else in place of the discounted cottage? I'd also worry that they think it is still the "family" cottage and can use it whenever they want. Depends on how your family members are.
Agree! If your father's estate is valued at over $900k, will your three siblings get dibs on the first $900K ($300k each and you get nothing?)

When I was executor for my mother's cottage, valued at $82K, one sibling was willing to buy at $72k. I figured it was reasonable as I would not have to pay a realtor 7% to sell. The court required all of the siblings to sign-off that they were okay with the price and buyer. Are you willing to have your three siblings sign-off with the price? Maybe include that you inherent nothing until the other three inherent an amount of $300k each before you receive any additional $$.

When your father bought the house for a deep discount, did he have any agreements with his relatives then? Maybe some other relatives (cousins) should have the opportunity to buy the place for full value.

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Re: Should I buy the family cottage?

Post by dave_k » Sat Nov 09, 2019 10:37 am

RickBoglehead wrote:
Fri Nov 08, 2019 8:13 pm
harvestbook wrote:
Fri Nov 08, 2019 12:57 pm
I bought the "family beach house" for a "steep discount" and ended up spending a lot of time and money on renovations. The work was enjoyable, but it's been 10 years and every trip there ends up with at least a day of work just maintaining it, much less finishing up the final touches. The family loves to stay there for free without doing any work, while I foot the bill for mowing, utilities, taxes, insurance, etc. Pretty sweet deal for them.

The worst part is, when we have a window for a vacation, it's usually, "Well, we better go check on that place." The end result is we very rarely get to take vacations anywhere else. And it's set back my retirement at least two years, and I don't really have the option to sell it due to emotional reasons (the emotions of others, not mine.)
This. Albatross.
Not necessarily. It depends heavily on individual factors. My wife and I bought her father's old beach house at a discount a few years ago, have done significant renovations, and we go there twice a year, doing over a week of work maintaining it each time, and we love it! We have an agency rent it out, so costs are covered which helps, but being worth over 2x what we paid for it (after a significant market increase) would be worth it alone. My wife's sister has never expressed any misgivings about us buying it for a discount (although it wasn't nearly as much as the OPs).

I'd buy it!

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Re: Should I buy the family cottage?

Post by averagelonghorn » Sat Nov 09, 2019 12:50 pm

HomeStretch wrote:
Sat Nov 09, 2019 9:31 am
*If* your intention as owner of the family cottage would be to limit/stop siblings’ use or to ask them to pay rent or help out with maintenance/costs, suggest you discuss this with Dad prior to purchase. Part of dad’s reason for offering you a $250k-$350k discount could be to keep this sentimental property accessible for use by the whole family (rather than as a 2nd personal residence for you) and he sees the discount as a way to underwrite your maintenance costs as a “property steward” over your generation’s lifetime of use.

It’s also a good time (pre-purchase) to ask Dad how he feels about you *possibly* selling the property in the future.
These are very good points from HomeStretch.... If it were me, I'd figure my well below market price kind of obligates me to make it available for other family to use, probably rent free. Not that you can't ask for participation in upkeep/utilities, etc; but you bear the brunt of it. Only you can say if your family dynamic makes that workable. In fact in my case, that's basically what we do.... we don't charge for family or close friends to use the place; but they're also willing to pitch in on doing work around the place. Our lake house doesn't directly have the generational aspect; but with mental accounting, I can attribute our ability to afford it partially to finding a well priced place, and partly to a property (Duplex) we bought from my Dad at slightly below market long ago.... we bought the lake house once that duplex was paid off.

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