Would you invest in real estate with a family member?

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zeke5867
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Would you invest in real estate with a family member?

Post by zeke5867 »

Or rent real estate to a family member (other than spouse)?

Is this ever a good idea?
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TomatoTomahto
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Re: Would you invest in real estate with a family member?

Post by TomatoTomahto »

You know it's a bad idea. Did you ask the question just to show someone that it's unanimous?
I get the FI part but not the RE part of FIRE.
Grt2bOutdoors
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Re: Would you invest in real estate with a family member?

Post by Grt2bOutdoors »

If you're going to rent it "gratis", that is one thing.

If you are planning on doing it as a "money-maker", forget it.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
chaz
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Re: Would you invest in real estate with a family member?

Post by chaz »

zeke5867 wrote:Or rent real estate to a family member (other than spouse)?

Is this ever a good idea?
No.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | | http://www.bogleheads.org/wiki/index.php/Main_Page
Muchtolearn
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Re: Would you invest in real estate with a family member?

Post by Muchtolearn »

No way
MWCA
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Re: Would you invest in real estate with a family member?

Post by MWCA »

My spouse sold her portion of a family property. I would highly recommend not getting involved with family. However, I'm sure many people will vouch to a positive experience.
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FelixTheCat
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Re: Would you invest in real estate with a family member?

Post by FelixTheCat »

Think of how your relationship would be if your family didn't hold up to their end of the arrangement. i.e. Not paying bills, not helping with maintenance, etc.

I would never invest with family or friends.
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NMK1
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Re: Would you invest in real estate with a family member?

Post by NMK1 »

In the two limited experiences I personally know of it was a nightmare. The one was a house owned by a family member with another family member as a tenant. She (the tenant) was always late on payments and would guilt the other family member (owner) about why she couldn't pay. We would hear all the time, "What am I supposed to do? Throw her out on the streets?"

She was just taking advantage of the situation and went on a vacation at the same time she was 3 months late on rent. That was the last straw and the owner relative proceeded with eviction notice, which almost tore the family apart.
freeze
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Re: Would you invest in real estate with a family member?

Post by freeze »

My wife's parents got a divorce about 8 years ago. They had lake property that we wanted to keep in the family rather than them selling it in the divorce. We bought out my mother-in-law's portion. Father-in-law owns 60% and we own 40%. For the most part it's been a pretty positive experience, even with building, etc. Plus you can never go wrong owning lake property in the north woods (WI and da UP). Ours is vacation property though, I don't think I would ever buy something to rent out with a family member and be landlords...
JArthur
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Re: Would you invest in real estate with a family member?

Post by JArthur »

It's a really bad idea. I can speak from personal experience. There are some immediate family members still not talking to each other years later.
Topic Author
zeke5867
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Re: Would you invest in real estate with a family member?

Post by zeke5867 »

Doesn't sound like a good idea...
Last edited by zeke5867 on Wed Jun 13, 2012 1:14 pm, edited 1 time in total.
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Re: Would you invest in real estate with a family member?

Post by Fallible »

I did it for many years with siblings and it came out well. If you do have problems, an estate attorney can draw up a contract detailing what's expected of each family member and which all can agree to. It can be based on the skills each member brings to the business: for example, one may be good at dealing with property management, another at gathering information needed to make good decisions, and another good on legal matters as they arise.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Jake46
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Re: Would you invest in real estate with a family member?

Post by Jake46 »

Been there. Done that. Never again.
exoilman
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Re: Would you invest in real estate with a family member?

Post by exoilman »

Not a chance
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tetractys
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Re: Would you invest in real estate with a family member?

Post by tetractys »

Depends on the family member's credit rating. -- Tet
porcupine
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Re: Would you invest in real estate with a family member?

Post by porcupine »

tetractys wrote:Depends on the family member's credit rating. -- Tet
It would depend on both Credit and Credibility.

- Porcupine
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dratkinson
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Re: Would you invest in real estate with a family member?

Post by dratkinson »

No... unless you are capable of bearing all expenses, doing all the work, and tolerating the excuse du jour.

Before entering the arrangement, it is much less work and cheaper to just give them the money and walk away.

After entering the arrangement, it is a much cleaner outcome to have the property burn to the ground and write the loss off on your taxes.

YMMV.
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Ruprecht
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Re: Would you invest in real estate with a family member?

Post by Ruprecht »

.....
Last edited by Ruprecht on Sun Jul 12, 2015 11:11 am, edited 1 time in total.
imagardener
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Re: Would you invest in real estate with a family member?

Post by imagardener »

No. Family operates in a different space than landlord-tenant space. When you turn a family member into a commercial client it almost never turns out well for the family relationship, things change and not in a good way. Business is business.

I would also not be a real estate partner with anyone other than my spouse unless there was no other choice.
Mill
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Re: Would you invest in real estate with a family member?

Post by Mill »

Im glad someone posted a thread on this, as my parents mentioned the possibility to buy their property with my brother. It isnt likely to come to fruition for at least 8 years, but the thoughts of how to make it all work out have been taking up some of my time lately. We (bro and I) get along great, but our personal finance, investing, wealth building philosophies are completely different. The more I think about it, my gut is telling me not to do it.
Ruprecht wrote:I've been renting to a family member for years and it's worked out very well, but within my family circle we're pretty much hard-core communists. I mean that pretty literally - i.e. "from each according to his ability, to each according to his need". In my opinion that mindset is essential, or else don't do it. The fact that you would even think to ask about it is proof that you definitely should not.
I think thats a good insight. Hadnt thought of it like that.
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prudent
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Re: Would you invest in real estate with a family member?

Post by prudent »

I did (in a way), to my regret. Relative wanted to buy a property and to be fair it was a screaming bargain. Relative already had 3 rental properties and couldn't get another mortgage, and asked me to lend him enough as a down payment so that the seller would carry the balance on a mortgage. This was to be a short-term loan until relative could sell one of the rental properties. It's been 10 years, have not seen a dime.

I know he's not squandering money somewhere else, he's upside down on the rentals and breaking even on cashflow, he just doesn't have the money to pay me back. I knew it wouldn't end well but I did it anyway. It's very tough to say no to family, especially if the deal is very good.

The money is not going to break me, but the worst of it is the constant tension any time we're together. He's embarrassed about the situation and although I never mention it, I can tell he's always anticipating I'm going to say something.
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wander
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Re: Would you invest in real estate with a family member?

Post by wander »

zeke5867 wrote:Or rent real estate to a family member (other than spouse)?

Is this ever a good idea?
It's a bad, bad, bad idea.
Lumpr
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Re: Would you invest in real estate with a family member?

Post by Lumpr »

zeke5867 wrote:Or rent real estate to a family member (other than spouse)?

Is this ever a good idea?
It is entirely dependent on the circumstances. For example, if you father was Sam Zell . . .

Practically, given the way you've asked the question, my intutition tells me the answer is "no" in your circumstance.
bungalow10
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Re: Would you invest in real estate with a family member?

Post by bungalow10 »

zeke5867 wrote:Or rent real estate to a family member (other than spouse)?
We rented a room on our house to my brother for six years. It worked out great.

I would also rent one of our apartments to him in a heartbeat. Unfortunately, he's wants to live in a different town than the rentals, his commute would be too long.

My FIL and his brother own land together. His brother built a cabin on part of it, which will make the difficult situation of selling it down the road even more so.

My MIL and FIL want all four of their sons to inherit their recreational land TOGETHER - joint ownership. I know I'm being the PITA DIL, but I have said we will either sell our share to whoever wants it, or buy everyone else out (if they choose) to own it all. I'm not going to be a joint owner and worrying about taxes, upkeep, rent, etc on property owned by what will likely be four couples of very different financial means.
An elephant for a dime is only a good deal if you need an elephant and have a dime.
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zeke5867
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Re: Would you invest in real estate with a family member?

Post by zeke5867 »

Thanks everyone for your replies. Doesn't sound like a good idea in most cases
gerntz
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Re: Would you invest in real estate with a family member?

Post by gerntz »

We've owned 8 rental units in common with wife's brother for 6 years. No problems. Why would there be vs. a friend?
SimonJester
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Re: Would you invest in real estate with a family member?

Post by SimonJester »

zeke5867 wrote:Or rent real estate to a family member (other than spouse)?

Is this ever a good idea?
Here is another way of asking this question:

I'm going to take an 8lbs sledge hammer to my big toe out on the back concrete patio... Is this ever a good idea?

:oops:
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin
fareastwarriors
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Re: Would you invest in real estate with a family member?

Post by fareastwarriors »

I'm surprised by the negativity but I guess everyone's family situtation is different.

I guess I am fortunate. I had no problem investing/doing business with my brother. He runs the real estate side (our home and 2 rentals) and I manage his investment/retirement accounts. And we jointly manage our parents' assets (even though they are still alive but we are just better at it, how that about that for trust).

Things are good. Our pot is steadily growing. :D


As mentioned before, rarely does it work out but there few times that it doess and it can be wonderful. Know yourself and your family member. The philosophy and temperament better align!
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FabLab
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Re: Would you invest in real estate with a family member?

Post by FabLab »

SimonJester wrote:
Here is another way of asking this question:

I'm going to take an 8lbs sledge hammer to my big toe out on the back concrete patio... Is this ever a good idea?

:oops:
I hate when that happens :D
The fundamental things apply as time goes by -- Herman Hupfeld
investor
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Re: Would you invest in real estate with a family member?

Post by investor »

"Never do business with: Friends, Relatives or neighbors"

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Easy Rhino
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Re: Would you invest in real estate with a family member?

Post by Easy Rhino »

I rented a room from my Dad for a few months. It wasn't a big problem.

Investing: I wouldn't touch it. Heck, my fiancee had a down payment on a condo under construction, which I didn't touch with a 10 foot barge pole until we were married. And then, you know, it was "ours".
daggerboard
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Re: Would you invest in real estate with a family member?

Post by daggerboard »

Bad idea, don't do.

I know because I am doing it now. Not what we wanted but where we ended up because we were trying to help.

BTW, if you are married it is good to develop a "policy" for this kind of stuff (doing business with family, helping family in financial stress) ahead of time so that you have guard rails in place and don't get sucked into a "situation".

We became much more hard-nosed and far less willing to help based on our experiences - which is sad.
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rdmayo21
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Re: Would you invest in real estate with a family member?

Post by rdmayo21 »

No to both. I wouldn't ever invest in real estate even if it was just me.
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praxis
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Re: Would you invest in real estate with a family member?

Post by praxis »

I know it is an awful idea to mix business and personal relationships. Why am I involved in two major deals like that?

We are 50/50 co-owners with another couple of a second home. The place is larger and nicer than we could justify if we owned it alone. I supervised the design, building, furnishing and ongoing maintenance of the cabin alone. The other couple come and enjoy it with their family and friends and often with us together. I know I would do all the upkeep anyway if I owned it alone and with this arrangement, every bill we pay is cut in half for us. So it is easy for me to overlook that they don't contribute much effort to the place. Both families live across the country from the property. We are happy we have this deal. So are they. We are in year six and still great friends.

My parents left some tillable farmland to us four kids. We have a farm manager that manages the contracts with the farmers that rent and farm it. I manage the rest of the bills for us and mail out checks to all of us yearly. We are in our fourth year and I am so scared of potential discord that I bend over backward to be precise in every calculation and documentation to my partners (siblings). We are all pretty grateful for this wonderful gift from our parents and it helps that we feel it honors them to get along and survive the occasional rough patches. I will do anything to keep it that way.
brogrammer
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Re: Would you invest in real estate with a family member?

Post by brogrammer »

I hold my dad's mortgage on his second home. I figure it's pretty low risk since I am an only child anyway. Plus I have a security deed so if he remarried and his wife hated me and inherited the house or something, I have some recourse. But I don't think I'd ever do business with in-laws, etc.
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Re: Would you invest in real estate with a family member?

Post by Toons »

No,Negative :happy :happy
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