I need some advice on whether to rent my home to my daughter

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jubal
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I need some advice on whether to rent my home to my daughter

Post by jubal » Mon Apr 02, 2012 2:56 pm

Here are the details: We are about $7000 away from having our home paid for. We also owe about $5400 in a home equity loan. We have around $6400 in savings in our credit union. My original plan was to pay off the house as soon as my savings got high enough to pay off the $7000 and still have $500 in savings, figuring that without a $750 house payment, my savings would quickly rebuild. The home equity loan is for my wife's teeth and next year she will probably need another $6000 of work to be done on her teeth. I was thinking I'd have most of the $5400 paid off by then, and could account for much of the future $6000 expenditure with my flexible spending account.

Now, my daughter who is married with three children recently found out she was pregnant with the fourth. She is due in November. They are currently in student housing paying about $900 per month, but will need to leave that housing sometime around when the baby is to be born because she is finishing up her schooling. Her husband who has a degree has been unable to find work, and so takes care of the kids while my daughter works. It's a fairly low-paying job, and they have some credit card debt so they are unable to qualify for a house payment. They really don't know what they're going to do.

Anyway, we thought we might buy a new house because my wife has a disability and we need move to eventually anyway. Then we'd rent the old house to my daughter. I just don't know if it's the right time..or if we can really accomplish all our goals for our own retirement, especially considering my wife might need extra care in the future with her condition. Any thoughts or help would be appreciated.
Shane

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Grandpaboys
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Re: I need some advice on whether to rent my home to my daug

Post by Grandpaboys » Mon Apr 02, 2012 3:05 pm

What happens if later she cannot pay the rent? What jepody are you in then for your own self preservation?Andwer those two questions and you have your answer.
Good Day | GP

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HomerJ
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Re: I need some advice on whether to rent my home to my daug

Post by HomerJ » Mon Apr 02, 2012 3:44 pm

Need a lot more information than what you've provided...

If you only have $6400 in savings, where are you going to find the money for a down-payment for a new house?

Can they all come live with you? Maybe you could live together for a year or so.

P.S. Unless it's for religious reasons, tell your daughter to get on birth control for a couple of years after this next baby until they figure out their finances... :)

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jubal
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Re: I need some advice on whether to rent my home to my daug

Post by jubal » Tue Apr 03, 2012 6:42 am

Grandpaboys wrote:What happens if later she cannot pay the rent? What jepody are you in then for your own self preservation?Andwer those two questions and you have your answer.
Good idea. Since that house would be paid off, we'd only have to make the full payment on the new house, instead of the partial because of the no rent coming in for that month...so in that way it's doable. Then again, if it became a habit (which it wouldn't, my daughter is very conscientious) it would be trouble.
rrosenkoetter wrote:
If you only have $6400 in savings, where are you going to find the money for a down-payment for a new house?
Yeah, that's one of the reasons we aren't ready to move. But my wife's health may cause that to be a problem we have to ignore. Not yet though. If it came down to it, I'd have to borrow money from my TSP.
Can they all come live with you? Maybe you could live together for a year or so.
Yeah, we've thought of that. Although our son and a friend are already renting from us, so we'd have to do some judicious kicking out. Which would probably be good as our son needs to get out on his own, and wants to...he just hasn't found a good enough job to pay the higher rent than what we're charging.
P.S. Unless it's for religious reasons, tell your daughter to get on birth control for a couple of years after this next baby until they figure out their finances... :)
This one was a surprise, and she's planning on having her tubes tied when the doc does the C-section this time. :)

Frankly, I'm leaning towards not doing it, but since I mentioned we might be able to do it, I'm worried that my daughter is getting her hopes up. I'd better nip that in the bud and let her know that it's a long shot. I'd rather not have to dip into the TSP because we don't have a down payment on a new house...this old house was supposed to be that down payment, but I don't know if that will happen anyway, considering the amount of work we have to do in the house before we can sell it. It might be a buy the new one, then fix up the old one and sell it kind of thing. My original plan (and my wife was trying to stick to it as well) was to wait until I was 59 1/2 and could just take some money out of our retirement account at that point for a down payment, or for the difference between what we could get out of this house, and what a new one might cost us. We are in a lower end house right now, so I'm thinking when we buy another one, it might be more expensive than what we can get out of this one.
Shane

Muchtolearn
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Re: I need some advice on whether to rent my home to my daug

Post by Muchtolearn » Tue Apr 03, 2012 12:57 pm

OP, I beg you. Do not do it. Practically, as one other poster said, you don't have much for a down payment and even if you did, it is not clear to me that you have the income to cover a new mortgage. Worse, you would be carrying the whole world on your shoulders. You can anticipate as a worse case scenario that your daughter along with her husband and 4 kids will not be able to pay you, won't pay you, or who knows? If anything happens to the husband or your daughter, the situation becomes a disaster. And if anything happens to you, you will face the situation of the new home being foreclosed and then all 8 of you living in your original house. Don't do it. Please.

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jubal
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Re: I need some advice on whether to rent my home to my daug

Post by jubal » Tue Apr 03, 2012 8:02 pm

That's pretty much the conclusion we have come to. Thanks for the counsel.
Shane

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wlpotts
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Re: I need some advice on whether to rent my home to my daug

Post by wlpotts » Wed Apr 04, 2012 3:35 am

jubal wrote: Any thoughts or help would be appreciated.
I'm with the poster Muchtolearn! Don't do it Shane.
In my opinion, you need to finacially protect your wife and yourself first and foremost. You both are entering the post-income/retirement phases of your lives. You need to protect yourselves first.

In an effort to put this into perspective, I have a question for you. When you were married and just starting out, did you have a parent or an in-law that financed your housing, childcare and expenses or did the two of you have to make some decisions based upon your life situation?
jubal wrote:my daughter who is married with three children recently found out she was pregnant with the fourth.... They are currently in student housing paying about $900 per month, but will need to leave that housing sometime around when the baby is to be born ... Her husband who has a degree has been unable to find work, and so takes care of the kids while my daughter works. It's a fairly low-paying job, and they have some credit card debt so they are unable to qualify for a house payment. They really don't know what they're going to do.
In life, there are difficult decisions to be made.

Respectfully,

wlpotts
Some have it. Some don't. Either way, here I am!

Sam I Am
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Re: I need some advice on whether to rent my home to my daug

Post by Sam I Am » Wed Apr 04, 2012 8:19 am

It seems many of your possible solutions require you raiding your retirement funds. That would be a mistake even if your wife enjoyed 100% health. I can tell you from personal experience, if there comes a time when you need health care services for her, as in home health aides, they do not come cheap.

IMHO you should be saving money like crazy for you and your wife, as it might become a very bumpy ride, exclusive of your children's housing woes.

One thought, perhaps your daughter and son could rent a large house (NOT YOURS) together, helping both of them without you in the middle of things.

Focus on you and your wife, your children must make their own way. I honestly don't think you can help them without endangering your own security in retirement.

Sam I Am

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jubal
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Re: I need some advice on whether to rent my home to my daug

Post by jubal » Wed Apr 04, 2012 3:00 pm

[quote="wlpotts]In an effort to put this into perspective, I have a question for you. When you were married and just starting out, did you have a parent or an in-law that financed your housing, childcare and expenses or did the two of you have to make some decisions based upon your life situation?

wlpotts[/quote]

We borrowed a bit of money from my parents and in-laws for some car repairs and schooling, but not a lot, and yes, we mostly made our decisions based upon our life situation, including going without a phone for a few months.
Sam I Am wrote:It seems many of your possible solutions require you raiding your retirement funds. That would be a mistake even if your wife enjoyed 100% health. I can tell you from personal experience, if there comes a time when you need health care services for her, as in home health aides, they do not come cheap.

Sam I Am
Good advice. I think my wife was getting hopeful that she would soon be able to get into a home that didn't require her to climb stairs to use the bathroom or go to bed. This looked like a way to help her out, and my daughter's family as well. It's a tough situation, but as you both have said, it's not right at this time to do it--or maybe ever in the way I've laid it out.
Shane

Skiffy
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Re: I need some advice on whether to rent my home to my daug

Post by Skiffy » Wed Apr 04, 2012 3:35 pm

My sister & BIL were landlords for one of their children. Don't do it! If they don't have the money to pay their rent it is very difficult to throw them out. So then you become their landlord AND moneylender. Let them be adults!

Muchtolearn
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Re: I need some advice on whether to rent my home to my daug

Post by Muchtolearn » Wed Apr 04, 2012 3:42 pm

BTW, this should not preclude you from executing your plan of having only 1 story for your wife. (Frankly even those of us in good health, as we get older, like past 60, ought to think about that--I will be in 7 months). But, you should sell the current house when buying a new one.

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DiscoBunny1979
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Re: I need some advice on whether to rent my home to my daug

Post by DiscoBunny1979 » Wed Apr 04, 2012 4:02 pm

I vote not to rent it out. 1) If the house was suppose to aid in a downpayment, renting the house to a family of 6 will quickly deteriorate the condition. So, eventually you will have to evict them and sell the house. Fixing up the house will cost $$$ in order to get a good price. 2) Renting to family is not a good idea. The renters might find it OK to be lazy with getting rent to you on time. They might expect that since they are 'family' that they could get away with certain things - like no security deposit OR not paying for damage done by Grandchildren because they are 'family'. 3) Renting means you are under the rules of the state you are in. For instance Renters have certain rights in certain states that give them the abilty to stay in their 'rental' for months without paying anything. You might have to start an eviction process that can take months. It's bad enough when no family members are involved, but 4 Children? 4) The OP needs to be concerned about their Retirement and their medical needs, not a Daughter's needs when that Daughter is prooving to be irresponsible (my opinion) in having children before they actually can afford to take care of them. The Daughter is finishing school, but yet the Husband can't find a job with his degree? Does the Daughter have a job lined up after school? Does the Daughter have any school loans? This has the possiblity of being messy and I would suggest they get their act together, but not at the OP's expense.

Curlyq
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Re: I need some advice on whether to rent my home to my daug

Post by Curlyq » Wed Apr 04, 2012 4:05 pm

My ex's parents moved into a one-story, one-bedroom home, both for wheelchair access and so that relatives could not move in with them. A smaller place for you and your wife will certainly help both financially and physically. You can always buy groceries for your daughter and family or just give them some money every month until they figure out their employment situation. I second the birth control comment that was posted earlier.

ResNullius
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Re: I need some advice on whether to rent my home to my daug

Post by ResNullius » Wed Apr 04, 2012 4:29 pm

Ok, I'll ask it. Why is she pumping out kids when her husband doesn't have a job and she doesn't have a job? Take care of yourselves, let them sink or swim.

ddunca1944
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Re: I need some advice on whether to rent my home to my daug

Post by ddunca1944 » Wed Apr 04, 2012 4:37 pm

Your daughter would very likely qualify for section 8 housing. And before you turn your nose up at it, the accomodations do vary. Some are clean and comfortable. I would encourage her to look at that possibility rather than put your own situation into further jepoardy.

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Watty
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Re: I need some advice on whether to rent my home to my daug

Post by Watty » Wed Apr 04, 2012 5:05 pm

Some other downsides to downside of renting it to her;

1) She or her husband might be able to find a job that is in a different location and being tied to the house would not be ideal. Being able to move easily is a huge plus when you are looking for a job.

2) You will have to declare the rent as income and pay income taxes on it. In addition to the normal taxes this could cause social security to be taxed or other benefits to be phased out because of the higher income.

3) If you have lived in the house for a long time then you may have a lot of price appreciation in it. If you sell it today you would likely qualify for the "homeowners capital gains exclusion" (Google this) and not pay any taxes on the gains. For example if you bought it for $50K 20 years ago and could sell it for $150K today they you have $100K in capital gains they you could likely exclude and not pay any taxes on. If you rent to them for a few years then you can lose this exclusion and then you might eventually have to pay taxes on the $100K gain when you sell the house. OUCH!!!

hazlitt777
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Re: I need some advice on whether to rent my home to my daug

Post by hazlitt777 » Wed Apr 04, 2012 5:50 pm

Is it possible for you to live together under the understanding it is only for a year or two...to help them get on their feet? You could charge them some nominal amount tht you could then use toward paying off the house, or put it in a savings account for them if you are feeling generous?

westie
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Re: I need some advice on whether to rent my home to my daug

Post by westie » Wed Apr 04, 2012 6:34 pm

It's easier and wiser to say NO now, instead of GO later.

milestogo
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Re: I need some advice on whether to rent my home to my daug

Post by milestogo » Wed Apr 04, 2012 8:09 pm

It is hard but you cannot help them if you don't take care of yourselves first. If you had so much surplus you could just gift it maybe you could do this but still might not really be good for your daughter. I am learning with adult children of a younger age they only appreciate what they earn themselves not what they are given.

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norookie
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Re: I need some advice on whether to rent my home to my daug

Post by norookie » Wed Apr 04, 2012 9:17 pm

Your kid is irresponsible and using your good intentions, tell e'm NO WAY. :oops: What a F'n mess for sure! JM0 ~ > DO NOT let them move into your house.
They will NEVER leave. They can't afford to. Smarten up!
" Wealth usually leads to excess " Cicero 55 b.c

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jubal
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Re: I need some advice on whether to rent my home to my daug

Post by jubal » Thu Apr 05, 2012 8:29 am

ResNullius wrote:Ok, I'll ask it. Why is she pumping out kids when her husband doesn't have a job and she doesn't have a job? Take care of yourselves, let them sink or swim.
She has a job. He takes care of the kids.
Shane

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Re: I need some advice on whether to rent my home to my daug

Post by Johm221122 » Thu Apr 05, 2012 8:35 am

Take her to section 8 and apply for food stamps.sell your house and downsize to small apartment(small and cheap)it may take years to sell but better not to be house rich cash poor

HornedToad
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Re: I need some advice on whether to rent my home to my daug

Post by HornedToad » Thu Apr 05, 2012 11:05 am

Unfortunately you can't afford it. It sounds like you are having some cash flow problems also. Sell your current house and move into a single story if that's what's needed. Then you don't have to raid your retirement and can pay the majority/all of the new house with the proceeds of the current house.

It's alot more painful to be 70-75 and broke than to be 30 and broke. Help your daughter with groceries/etc if you will.

may pop
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Re: I need some advice on whether to rent my home to my daug

Post by may pop » Thu Apr 05, 2012 1:29 pm

A different way to look at it is how much do you have to charge for rent. Dont forget mortgage payment,TAXES, home owners insurance and anything else you can add.
Add all these up and it will be more than they can afford. That way THEY say to you its to expensive and you dont have to say no. THEY said it themselves. So you are not the bad guy.
If they move in with you are you the instant baby sitters? That may be accecptable or not.
Ron

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goggles
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Re: I need some advice on whether to rent my home to my daug

Post by goggles » Thu Apr 05, 2012 2:47 pm

Sheeba, your posts are combative and mean-spirited. Cut it out.

Jubal, I don't really have any advice for you, but I wish you luck.

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jubal
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Re: I need some advice on whether to rent my home to my daug

Post by jubal » Thu Apr 05, 2012 2:57 pm

Some clarification here: First of all, my daughter isn't an "idiot". She shops intelligently, buys clothing and other things at thrift stores, coupons and buys things on sale, all to help with the budget. They don't get food stamps. Secondly, my daughter wouldn't kill her baby. Thirdly, despite our best efforts, sometimes children are conceived, and sometimes it's a surprise. The fourth one was a surprise. She'd already sold the car seat, the crib, and other stuff, with plans on getting the tubes tied in the near future. Fourth, it wasn't my daughter who came up with the idea of renting my house. It was my idea--and I hadn't really thought it through before blurting it out. As soon as I mentioned it, I had reservations, but still wondered if there was a way to make it work.

That being said, I appreciate a lot of the advice--especially where it concerns my wife's and my future stability. Those were pretty much the concerns I had. I concur after thinking about it, and reading your thoughts, that it would be a bad move. Thanks for the help. :)
Shane

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Re: I need some advice on whether to rent my home to my daug

Post by ddunca1944 » Thu Apr 05, 2012 3:25 pm

Sometimes our adult children make unwise choices. I do think that bringing 4 children into the world before one is financially stable is an unwise choice. And, in this day and age, I don't buy the idea of "accidents". There are so many "ounces of prevention" that could be taken. It is all well and good to shop wisely, use coupons, and buy on sale. But I see nothing to praise about "not taking food stamps". The food stamp program is created for people to help them give their children better quality food on fewer dollars.

Perhaps if your daughter used food stamps, she could free up some dollars to help with the housing situation. And Sec 8 housing has been suggested previously.

As a parent, I do think it would be very, very wise for you to limit your help to the non-financial kind (and as a grandparent, I recognize how very difficult that can be). There are safety nets she has not availed herself of.

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jubal
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Re: I need some advice on whether to rent my home to my daug

Post by jubal » Thu Apr 05, 2012 7:37 pm

ddunca1944 wrote:Sometimes our adult children make unwise choices. I do think that bringing 4 children into the world before one is financially stable is an unwise choice. And, in this day and age, I don't buy the idea of "accidents". There are so many "ounces of prevention" that could be taken. It is all well and good to shop wisely, use coupons, and buy on sale. But I see nothing to praise about "not taking food stamps". The food stamp program is created for people to help them give their children better quality food on fewer dollars.

Perhaps if your daughter used food stamps, she could free up some dollars to help with the housing situation. And Sec 8 housing has been suggested previously.

As a parent, I do think it would be very, very wise for you to limit your help to the non-financial kind (and as a grandparent, I recognize how very difficult that can be). There are safety nets she has not availed herself of.
The reason I pointed that out about the food stamps was because of allegations that my daughter was living on the private dole. She doesn't do the food stamps, but she does do WIC, which is a great supplemental program to help low income families with their nutritional needs. Also, her church provides food if necessary, though I'm not sure if she's taken advantage of that yet. And you're right about ounces of prevention. They are trying to live by faith and they prayed about having their children (except for the last one). Somehow they felt that God had told them things would work out. I know that's a tough pill to swallow for non-believers. But all of her children have been via C-section and the doc said she could have a maximum of four, so there won't be any more surprises. Honestly, I think those of you who suggested she could've practiced better birth control were correct. I've taken your suggestion and passed on the Sec 8 housing info.
Shane

milestogo
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Re: I need some advice on whether to rent my home to my daug

Post by milestogo » Thu Apr 05, 2012 10:36 pm

Surprises do happen in terms of birth control and it sounds like she is trying. You should remain self sufficient as it is the best course to help you and her. She should access all goverment resources available as that is why the safety net is there. We all pay taxes for people who fall on hard times.
I truly think from what you have told us it would be unwise to rent your house to her.

Johm221122
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Re: I need some advice on whether to rent my home to my daug

Post by Johm221122 » Fri Apr 06, 2012 12:09 am

There is nothing wrong with receiving food stamps,I in know way meant that getting food stamps is a reflection of your daughters values.Food stamps should really be looked at in her situation.That's what there for

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jubal
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Re: I need some advice on whether to rent my home to my daug

Post by jubal » Fri Apr 06, 2012 6:33 am

I've always believed that food stamps and other entitlements are there as a short-term solution and that people should be working to get off of them. In fact, this quote by Benjamin Franklin pretty much summarizes the way I feel: “I am for doing good to the poor, but...I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed...that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

That being said, I believe we as individuals are the ones who should take care of others, and that it's not the government's job by and large to do so. That a safety net should be in place, I can agree with, but that it should be a long-term solution---well, I just don't believe that government is the best solution for most problems. I've spent the last decade posting and blogging about the overreach of government, and I'd be hypocritical now to decide, well, because it's one of my own family, it's okay. I don't begrudge anyone for the decisions they make in this regard, heck, I was on food stamps for a short period in my younger days. That's what they're for. But people are best helped by other people, albeit, people who are in a position to do so, which of course, might not be me.

Anyway though I appreciate the suggestions, I thought that there were several folks who were taking pot shots at my daughter and her husband, which I thought was beneath what I'd come to expect from Bogleheads. I didn't ask for judgments upon my daughter--just advice. And I appreciate the well-thought-out suggestions that have been given.
Shane

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