Buying House for Adult Child

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jeffyscott
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Re: Buying House for Adult Child

Post by jeffyscott »

Oddlot wrote: Tue Nov 23, 2021 3:20 pmWe do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible.
If you have an idea of how much excess you have, perhaps you could come up with a monthly amount that the excess can (safely and conservatively) fund for her as an early inheritance? Then she can use that for rent, etc. This avoids the investment/commitment of buying a house for now, but you can revisit that later, depending on how things go.

She's presumably going to inherit your money and house someday, so I think it makes sense to try to help her learn how to live independently and manage money before that happens.
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Matahari
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Re: Buying House for Adult Child

Post by Matahari »

jeffyscott wrote: Tue Nov 23, 2021 3:51 pm
Oddlot wrote: Tue Nov 23, 2021 3:20 pmWe do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible.
If you have an idea of how much excess you have, perhaps you could come up with a monthly amount that the excess can (safely and conservatively) fund for her as an early inheritance? Then she can use that for rent, etc. This avoids the investment/commitment of buying a house for now, but you can revisit that later, depending on how things go.

She's presumably going to inherit your money and house someday, so I think it makes sense to try to help her learn how to live independently and manage money before that happens.
Home ownership for someone who has not been able to live and fund a lifestyle independently is not a great first step. I agree with jeffyscott; helping her rent her own place so that she can, at least, learn how to take care of her own premises seems like the wisest solution. You mention buying "a house." You could rent her "a house." Or you could start her out with an apartment and work her way up from there towards something that requires more upkeep.
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willthrill81
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Re: Buying House for Adult Child

Post by willthrill81 »

If you buy her a home, I can virtually guarantee that that you will continue to be on the hook for financially supporting her. There are clearly deeper issues at work here than only finances, and money does not solve these problems.
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Gundy
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Re: Buying House for Adult Child

Post by Gundy »

Buy The Millionaire Next Door book.

Read the chapter, "Economic Outpatient Care".
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willthrill81
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Re: Buying House for Adult Child

Post by willthrill81 »

Gundy wrote: Tue Nov 23, 2021 4:16 pm Buy The Millionaire Next Door book.

Read the chapter, "Economic Outpatient Care".
That's a fantastic section. I instantly thought about it when reading the OP. One of the real interchanges Stanley had with a wealthy couple was described in the second book of that series and was along the lines of what's below.

"We want to buy our daughter's family a home."

"Can she afford it?"

"You don't understand. We want to buy them a home."

"Can she afford to maintain the home, pay for property taxes, and live the lifestyle of those who live in homes in that neighborhood?"
“Good and ill have not changed since yesteryear; nor are they one thing among Elves and Dwarves and another among Men.” J.R.R. Tolkien, The Lord of the Rings
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Shackleton
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Re: Buying House for Adult Child

Post by Shackleton »

Oddlot wrote: Tue Nov 23, 2021 3:20 pm Thanks to all for your thoughtful responses.

As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible. The relationship is OK.

I think our resources are right on the border line to fund this.

I'm intrigued by ideas along the line of an early inheritance, gift, etc. Anything out of the box, in other words.

I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
I can understand not wanting to give out too many details but it’s hard to give advice tailored to your situation without more details. “Low 7 figure portfolio” could be $1 million or $4 million. That’s a big difference. Your wife works part-time, how much of your expenses are covered by her income? Are you currently having to pull money from retirement/portfolio sources to fund your expenses?How long is she intending to work, because once she stops, you’ll be increasing the amount needed from the portfolio.

I think you could get an idea of how good/bad this would be from a financial standpoint by modeling it in FireCalc using the various “portfolio changes” options. But overall, I agree that your daughter would be much better off renting and living along before attempting homeownership (assuming she has never lived alone.)
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Watty
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Re: Buying House for Adult Child

Post by Watty »

Oddlot wrote: Tue Nov 23, 2021 3:20 pm Thanks to all for your thoughtful responses.

As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible. The relationship is OK.

I think our resources are right on the border line to fund this.

I'm intrigued by ideas along the line of an early inheritance, gift, etc. Anything out of the box, in other words.

I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
A condo instead of a house might be more affordable and it would eliminate a lot of the maintenance concerns.

Just for brainstorming one other thing you might look into is buying a duplex then she could rent out the other half. Being a landlord is not for everyone, including me, but that income might cover the expenses and maybe a small mortgage. There are of course lots of ways that could turn out badly but it could be worth adding to your list of options to consider.
ncbill
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Re: Buying House for Adult Child

Post by ncbill »

Watty wrote: Tue Nov 23, 2021 4:40 pm
Oddlot wrote: Tue Nov 23, 2021 3:20 pm Thanks to all for your thoughtful responses.

As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible. The relationship is OK.

I think our resources are right on the border line to fund this.

I'm intrigued by ideas along the line of an early inheritance, gift, etc. Anything out of the box, in other words.

I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
A condo instead of a house might be more affordable and it would eliminate a lot of the maintenance concerns.

Just for brainstorming one other thing you might look into is buying a duplex then she could rent out the other half. Being a landlord is not for everyone, including me, but that income might cover the expenses and maybe a small mortgage. There are of course lots of ways that could turn out badly but it could be worth adding to your list of options to consider.
Yep, love my townhome where I don't have to do anything outside if I don't want.

One friend bought something similar then rented it to his daughter...raising the rent month-by-month to incentivize her to get a mortgage and buy it from him.
smitcat
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Re: Buying House for Adult Child

Post by smitcat »

Oddlot wrote: Tue Nov 23, 2021 3:20 pm Thanks to all for your thoughtful responses.

As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible. The relationship is OK.

I think our resources are right on the border line to fund this.

I'm intrigued by ideas along the line of an early inheritance, gift, etc. Anything out of the box, in other words.

I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
"We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible."
I think this may be a key to a best solution. Whatever the reason for your concern about abilities to live independently I can almost guarantee you are not a family sample group of one. There are very likely 1,000's of situations exactly like yours and there are likely help groups out there which you can tap into for the best solutions for your situation. I wish you good luck and good results...
twh
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Re: Buying House for Adult Child

Post by twh »

Oddlot wrote: Tue Nov 23, 2021 3:20 pm Thanks to all for your thoughtful responses.

As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible. The relationship is OK.

I think our resources are right on the border line to fund this.

I'm intrigued by ideas along the line of an early inheritance, gift, etc. Anything out of the box, in other words.

I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
Given that, I think maybe the trust route makes the most sense. The hardest part of this is finding a trustee that will succeed you after you die, but carry out your wishes faithfully.
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Sandtrap
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Re: Buying House for Adult Child

Post by Sandtrap »

Watty wrote: Tue Nov 23, 2021 4:40 pm
Oddlot wrote: Tue Nov 23, 2021 3:20 pm Thanks to all for your thoughtful responses.

As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible. The relationship is OK.

I think our resources are right on the border line to fund this.

I'm intrigued by ideas along the line of an early inheritance, gift, etc. Anything out of the box, in other words.

I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
A condo instead of a house might be more affordable and it would eliminate a lot of the maintenance concerns.

Just for brainstorming one other thing you might look into is buying a duplex then she could rent out the other half. Being a landlord is not for everyone, including me, but that income might cover the expenses and maybe a small mortgage. There are of course lots of ways that could turn out badly but it could be worth adding to your list of options to consider.
+1
Sort of what I did and also structured into my trust and estate planning.
However, I already had a number of rentals to choose from.
However in my case it was sort of a “special needs” adult scenario so I knew going into it that “nobody” was going to change and if all expenses were at least a contribution then I would at least take that “win”.
The fact that other rentals make for a safety net is a bonus but of course not everyone is heavily invested in r/e and can do that.

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celia
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Re: Buying House for Adult Child

Post by celia »

Since we don’t know the “back story”, I encouage OP to think ahead when DD is his age. Will she be on Medicare or Medicaid? What will she need to do to qualify? What will she spend her time doing after she “retires”? Will she need a steady stream of income? Will someone else need to help her make major life decisions (health, transportation, where to live, how to manage ‘her’ money/assets)?

This sounds like you should visit an estate planning attorney to set up a trust for her, special needs or otherwise. The biggest decision is who you can count on as trustee and their successor, preferably someone who will outlive her (ie, younger). You and your DW can be trustee while you are living, but when you die or lose cognitive skills, then what?

It’s better to figure this out now than to avoid it.
KlangFool
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Re: Buying House for Adult Child

Post by KlangFool »

OP,

Your goal is to set up your kid to live in a life style that they can afford. Not in a life style that you can afford. You would not be around forever. Hence, buying a house and set her up to live in a life style she cannot afford is definitely the wrong way to go.

She needs a realistic view what she can afford on her income plus some inheritance from you. The sooner that she learned the lesson, the better it will be for her.

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Tamarind
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Re: Buying House for Adult Child

Post by Tamarind »

I received a down payment from my parents and they were on the deed for several years as a result. However, there were significant differences from OP and their child.

I was 24 and self supporting at the time. I paid all expenses other than the down payment. After I got married my wife and I refinanced to repay the down payment plus interest and remove my parents from the deed. For us it was a valuable headstart. We will own our home debt free at age 40 and we were able to benefit from homeownership without sacrificing retirement savings early in our careers. It worked because we are all low drama people and because my parents were pleasantly surprised to get the money back.

I'm not going to weigh in on whether OP and wife should or should not subsidize their child in this way. Given their ages and nest egg, I presume the child will get some significant amount of money eventually anyway, and will do what they want with it at that time.

However, for the sake of relationships while you are all still living, I strongly recommend that you treat what you spend on this as a gift. Don't give an amount that you cannot let go of without strings attached. Few things are more toxic in a family than control via money, IMO, and that is true no matter the characters and closeness of the relatives.
Marseille07
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Re: Buying House for Adult Child

Post by Marseille07 »

Oddlot wrote: Tue Nov 23, 2021 3:20 pm I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
What's wrong with maintaining the status quo or she simply moves out to an apartment? There's quite a leap from living with parents to owning a house, financed by parents.
JackoC
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Re: Buying House for Adult Child

Post by JackoC »

jeffyscott wrote: Tue Nov 23, 2021 3:51 pm
Oddlot wrote: Tue Nov 23, 2021 3:20 pmWe do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible.
If you have an idea of how much excess you have, perhaps you could come up with a monthly amount that the excess can (safely and conservatively) fund for her as an early inheritance? Then she can use that for rent, etc. This avoids the investment/commitment of buying a house for now, but you can revisit that later, depending on how things go.

She's presumably going to inherit your money and house someday, so I think it makes sense to try to help her learn how to live independently and manage money before that happens.
I agree with this general approach. OP's statement in second post
"As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible."
renders of doubtful relevance many of the responses along the lines 'kid should work full time'. There's some reason she doesn't that OP apparently accepts but does not want to disclose, so that line of criticism is basically a dead end. Reading between the lines I agree with you and some other posts that rental assistance is the natural first step in a situation where you want to benefit a child *you* (not disembodied voices on the internet) find worthy of it, before you die, with 'low 7 figures' (another typically vague piece of information on questions like this) put away.

One of our kids lives in a property owned by a family LLC of which the kids are equal owners but I'm the sole manager. She works full time and pays market rent to the LLC, ie to herself and siblings. That's a hybrid idea along the lines of seeing how renting works first, in a property you could rent to somebody else if it doesn't work out (as far as economics, whether you could/should pull the rug out from under a kid you first offer to support is a different issue). Although that LLC was originally set up with gifts that exceeded the annual gift tax exclusion amount so involved lawyer input including gift tax return, though OTOH took advantage of the IRS accepted practice of counting the gift value of assets used to fund an LLC in which the recipient has no management control at less than the market value of those assets. It's not a simple DIY and I'm not saying it's necessarily suitable in this case, it's just one idea on the menu.
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Re: Buying House for Adult Child

Post by Carefreeap »

I have a number of friends/aquaitences who have children who have bi-polar disease. It's quite common. I'm not saying this is what is going on with OP's daughter but the analogy might be helpful. Because of the mood swings they can be very difficult people to live with. They are generally terrible with money and often have substance abuse problems. While medication can help they often go off their meds because they think they are fine. Having stable housing and some regular stipend (vs lump sums of money) are a way to ensure some structure in their lives.

I like the idea of a special needs Trust and encourage the OP to seek legal counsel which specializes in this sort of thing. If the OP is concerned that his daughter might need Medicaid down the road it's important that things are structured correctly.

Good luck OP. It's obvious you care for your daughter very much.
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clip651
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Re: Buying House for Adult Child

Post by clip651 »

Oddlot wrote: Tue Nov 23, 2021 3:20 pm Thanks to all for your thoughtful responses.

As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible. The relationship is OK.

I think our resources are right on the border line to fund this.

I'm intrigued by ideas along the line of an early inheritance, gift, etc. Anything out of the box, in other words.

I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
I agree with others above who have suggested renting instead of buying as a good option. Lots of pluses to renting in a situation like this:

No real estate transaction costs like you would have for buying a home.

Smaller monthly assistance with rent, instead of a big lump of money gone from your portfolio to buy a house or take on a mortgage. You say your resources are on the border line to help fund this - renting would hopefully be less expensive overall, and you can pick what monthly amount you can manage and see what you can find for her in that range.

No maintenance costs (property tax, replacing and repairing appliances, new furnace, new roof, driveway repair, who's going to mow the lawn, etc with a house).

Rent is a shorter term commitment, both for you and your daughter. This may be helpful for the transition for her, with whatever challenges she might have. You could help her get a 1 year lease, and make whatever arrangements make sense in your family situation to help her a little or a lot with rent each month, plus or minus an allowance for food and utilities, etc. If it doesn't work out, at the end of the year, she can move back in with you if needed, and you're no worse off in terms of living situation for you and for her than you are now. If it doesn't work out, there's no need to sell the house (more transaction costs, plus market risk if you can't sell quickly for the price you want). And if it's working well, she can stay in the same rented apartment or house, or move to something more suitable (less expensive, more space, closer to a new job, or whatever the case might be).

Depending on the nature of your concerns, you could put limits on your help, such as you'll only keep helping with rent if she keeps her job, or gets any medical help or counseling she might need, or whatever else makes sense in her situation and your family situation, based on your concerns about her and your ability and willingness to help.

Something else to keep in mind - if you are worried she may never be self sufficient for whatever reason, it may make more sense financially to have her continue to live with you long term rather than spending down your portfolio to get her out of the house. This assumes you are all OK living together, and that she might be of some help to you as you and your wife age. Keeping expenses lower now, rather than draining your portfolio to help her now, will leave more money for you to take care of yourselves as you age, and also has the potential to leave her a larger inheritance (if you wish) which you could structure in a way to give her a regular monthly income after you are gone.

Just some thoughts. The best answer will depend on a lot of details from your situation that you may understandably not want to share here.

best wishes,
cj

(edited to fix a few typos)
Last edited by clip651 on Sat Nov 27, 2021 8:53 pm, edited 1 time in total.
AnnetteLouisan
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Re: Buying House for Adult Child

Post by AnnetteLouisan »

OP, please don’t blame yourself. It’s great that your daughter is working part time. Major social and cultural shifts have occurred that have caused over 30 percent of the working age population to be out of the full time workforce for one reason or another. Mass affluence means that many offspring of successful and high achieving parents are not really feeling compelled to work the way we were, especially when others in the family have done well and are known to have significant resources, which may be resented. Mass media has also created a lot of people who have expectations and demands inconsistent with how the world now works and reality is quite jarring. The Covid economy has displaced millions of hardworking people, it’s devastating. Add to that abusive and narcissistic behavior, emotional problems, family breakdown, drug and alcohol deregulation and campus misbehavior, crime, social media culture etc, many of us have a relative who has either not adapted, been victimized and is not fully productive and their best self. It’s hard to know how to help especially in such a competitive world that will doubtless be less kind to them than family. One of my first questions was about life insurance I was maintaining for a relative and concerns about beneficiary switching, so my understanding of this is more than theoretical.

Its natural to want to help and to try to help. I hope you find a way that works for you.
Last edited by AnnetteLouisan on Sat Nov 27, 2021 7:02 pm, edited 1 time in total.
Simple Simon
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Re: Buying House for Adult Child

Post by Simple Simon »

You have probably thought of this, can you divide your existing house into two parts so that you live in one part and she lives in the other?
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TN_Boy
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Re: Buying House for Adult Child

Post by TN_Boy »

Oddlot wrote: Tue Nov 23, 2021 3:20 pm Thanks to all for your thoughtful responses.

As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible. The relationship is OK.

I think our resources are right on the border line to fund this.

I'm intrigued by ideas along the line of an early inheritance, gift, etc. Anything out of the box, in other words.

I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
Given that your resources are "right on the border line to fund this" it seems like a pretty bad idea to buy her a house. She clearly cannot afford it.

Even if you buy the house, someone has to pay for utilities, home repairs, furniture, do/pay for yard care, pay property taxes, etc. Given that your daughter is only working part time, it seems like you are setting everybody up for an ongoing financial problem.

Why not just help with renting? Even moving into an apartment and becoming liable for rent, utilities, dealing with landlord, etc requires some responsibility. If that goes well, and she starts to earn more money, maybe then consider helping her buy a house. But why buy her one now?
Dregob
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Re: Buying House for Adult Child

Post by Dregob »

Oddlot wrote: Tue Nov 23, 2021 8:45 am I am fully retired and my wife works part time, both in our 70's. SS covers about 60% of our current expenses; no pensions. Our adult only-child lives with us and works part time, wants her own house, but is not close to having the money. Our retirement portfolio is in the lower 7-digits. We live in a higher cost state, but not California. She would not tolerate a roommate.
Our first thought is to cover the purchase price less any financing she can get and hold her accountable for expenses, but frankly, that will be a stretch for her. There are some acceptable houses in the $250K range in our area. The market in our area is tight so prices have been rising.
Has anyone bought a house (or helped buy one) for their adult child and have any wisdom to relate? Did you work with a financial adviser? Any comments would be appreciated.
Would not tolerate a roommate? Works part time? Unless there is a disability I would say she is spoiled. Sorry for the blunt reply.
Get a full time job and in a year we will talk about it.
AnnetteLouisan
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Re: Buying House for Adult Child

Post by AnnetteLouisan »

She could be a victim of crime, trauma or a combat veteran. She may be raising a child alone. Not our business at all, but “spoiled” is by far not the only possibility.
shess
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Re: Buying House for Adult Child

Post by shess »

ncbill wrote: Tue Nov 23, 2021 4:47 pm
Watty wrote: Tue Nov 23, 2021 4:40 pm
Oddlot wrote: Tue Nov 23, 2021 3:20 pm Thanks to all for your thoughtful responses.

As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible. The relationship is OK.

I think our resources are right on the border line to fund this.

I'm intrigued by ideas along the line of an early inheritance, gift, etc. Anything out of the box, in other words.

I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
A condo instead of a house might be more affordable and it would eliminate a lot of the maintenance concerns.

Just for brainstorming one other thing you might look into is buying a duplex then she could rent out the other half. Being a landlord is not for everyone, including me, but that income might cover the expenses and maybe a small mortgage. There are of course lots of ways that could turn out badly but it could be worth adding to your list of options to consider.
Yep, love my townhome where I don't have to do anything outside if I don't want.

One friend bought something similar then rented it to his daughter...raising the rent month-by-month to incentivize her to get a mortgage and buy it from him.
It occurs to me that a condo or a duplex might neatly sidestep the issue of making sure that everything is "fair". Instead of the parents having to make an argument for why the daughter needs to pay more, and having the daughter argue back, the parents can just say "The other unit is paying $X". That doesn't mean the daughter also has to pay $X, but it does mean that you aren't comparing with some hypothetical made-up amount. At least for me, that kind of "I have to enforce reality" issue is one of the main reasons I would tend to avoid financial interactions with family members.
SnowBog
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Re: Buying House for Adult Child

Post by SnowBog »

TN_Boy wrote: Sat Nov 27, 2021 5:02 pm
Oddlot wrote: Tue Nov 23, 2021 3:20 pm Thanks to all for your thoughtful responses.

As some of you have suspected, there is more going on here, but I don't want to get into more details. We do have concerns for our daughter's ability to live independently and manage money, but we would like to make this happen if at all possible. The relationship is OK.

I think our resources are right on the border line to fund this.

I'm intrigued by ideas along the line of an early inheritance, gift, etc. Anything out of the box, in other words.

I doubt there is a good solution for this, but maybe we are looking for something that is least bad.
Given that your resources are "right on the border line to fund this" it seems like a pretty bad idea to buy her a house. She clearly cannot afford it.

Even if you buy the house, someone has to pay for utilities, home repairs, furniture, do/pay for yard care, pay property taxes, etc. Given that your daughter is only working part time, it seems like you are setting everybody up for an ongoing financial problem.

Why not just help with renting? Even moving into an apartment and becoming liable for rent, utilities, dealing with landlord, etc requires some responsibility. If that goes well, and she starts to earn more money, maybe then consider helping her buy a house. But why buy her one now?
+1 and if she's never (or not recently) lived on her own, her outlook might change dramatically after living in a rental for a while. Might decide they get lonely without others around, or might decide that having others to help split the chores and/or costs might be advantageous to their circumstances. And it gives you a view into the "reality" of them living independently before you tie up a bunch of your money. (Not to mention the housing market is insane, you'll probably get more for your money waiting, and if it turns out that independent living isn't going to work for her, you don't have a large financial commitment that may have depreciated in a few years if the market cools off.)

Personally, while I'm many years away (child is only 13), I would feel that I'm doing my grown children a disservice if I "helped" them get into a situation they couldn't sustain. In my mind, it's got to be something that they can "afford" all ongoing costs, including monthly payments, insurance, utilities, if/as needed hired maintenance/upkeep, etc. I wouldn't be opposed to helping with "first/last months rent + security deposit" (for rental, or "down payment" for purchase), to help them get on their feet, maybe even some extra cash for household essentials they may not have now (like pots/pans, dishes, couch, etc. if those are all yours today). But IMHO anything beyond that is likely setting up for future disappointments...
tim1999
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Re: Buying House for Adult Child

Post by tim1999 »

I would just leave things the way they are now.
Katietsu
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Re: Buying House for Adult Child

Post by Katietsu »

I would have trouble staying objective in this situation. I would want a consult with an outside party as to whether you can afford it, maybe this could be a financial planner. Remember that that keeping yourself strong and stable is also a gift to your daughter.

I suspect estate and trust attorneys have more experience than they would like dealing with these types of issues. Regardless of whether you purchase a house or not, a consult with estate/trust and or elder care attorney might be helpful.

I will add my voice to all those who feel that a leap to single family home ownership with all the responsibilities and the potential for unexpected expenses and repairs from the current situation seems to have a great deal of risk. A gift of $500 or $1000 a month towards a one year lease seems like a safer place to start. If you have concerns about the daughter living independently, it seems that a rental would have less for the daughter to manage and increase her likelihood of success. One issue that I have not seen mentioned is your future ability to physically help the daughter with upkeep of a house. Maybe you see yourself handling it when her dishwasher leaks or the A/C blows. And maybe you have another decade or more to serve in such capacity. But, it is equally likely that you or your spouse starts having health problems that reduce or eliminate your ability to assist your daughter. Being able to call a landlord could be the difference between success and failure for your daughter’s ability to live independently.
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camillus
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Re: Buying House for Adult Child

Post by camillus »

Is your kid more or less able to work than your 70 year old wife?

I recommend you and your wife see a therapist if you haven't already. That side of things in my opinion is more important to get right than how things are financially structured. What's your plan for setting and maintaining boundaries - especially in the face of an upset adult child? How can you spend the rest of your life in relative happiness at the same time that your kid is struggling with independence?

Sorry you are in this situation. Good luck.
51% US / 34% ex-US / 15% “bond”
DarthSage
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Re: Buying House for Adult Child

Post by DarthSage »

Another vote for renting, to test the waters.

It doesn't sound like your daughter is in a place to manage home ownership--paying the taxes and other bills, fixing whatever problems crop up (leaky faucet, dead furnace, etc.), or regular home upkeep.

I understand where you're coming from--I have a 24yo son with autism, anxiety, and depression. He currently works full-time and goes to school part-time (high functioning, obviously). We don't think he'll ever be able to leave far from a caring family member. We're cautiously optimistic that he'll one day live on his own. Luckily, he has siblings who are wiling to pitch in. He also has some money left to him by his grandmother, that could be used to purchase a condo or townhouse (probably a better choice for him--no outside chores).

A frank discussion with an estate attorney could help you navigate this--perhaps a special needs trust, maybe an outside entity to look out for her needs.
CZjc1330
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Re: Buying House for Adult Child

Post by CZjc1330 »

A very personal question.
From what little I know of the details you provided I would not do it. Read the "Millionaire Next Door" book about subsidizing adult children. Not a good idea.
Really time to let your daughter grow up, become independent.
sawdust60
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Re: Buying House for Adult Child

Post by sawdust60 »

Instead of the 'is it a good idea' approach, here is 'how it might be done'.

Without the resources for daughter to purchase and the associated ongoing expenses, there is little question of the need for your continued help.

You might cosider that you could finance the house. She would be obligated for the monthly payment to you, and you would show the interest income on your tax return.

The AFR minimum rate for interest is set monthly. 1.88% Long term rate for December 2021
https://resources.evans-legal.com/?p=2591

250,000 x 1.88 / 12 = 392/month (interest only)
-- or --
30-year payoff = 909/month

Set the payment to include insurance and taxes, so you can avoid the questions regarding whether those payments were made.

Include a provision in the loan document to increase the balance if an advance is needed to cover a major repair (e.g. roof or A/C).

The title company will have an attorney who can draft the loan documents, which would be signed at closing. Daughter will be the purchaser. You will be the lender. Since you hold the mortgage, your consent would be needed for any transactions or other encumberances.
AnnetteLouisan
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Re: Buying House for Adult Child

Post by AnnetteLouisan »

DarthSage wrote: Sun Nov 28, 2021 9:33 am Another vote for renting, to test the waters.

It doesn't sound like your daughter is in a place to manage home ownership--paying the taxes and other bills, fixing whatever problems crop up (leaky faucet, dead furnace, etc.), or regular home upkeep.

I understand where you're coming from--I have a 24yo son with autism, anxiety, and depression. He currently works full-time and goes to school part-time (high functioning, obviously). We don't think he'll ever be able to leave far from a caring family member. We're cautiously optimistic that he'll one day live on his own. Luckily, he has siblings who are wiling to pitch in. He also has some money left to him by his grandmother, that could be used to purchase a condo or townhouse (probably a better choice for him--no outside chores).

A frank discussion with an estate attorney could help you navigate this--perhaps a special needs trust, maybe an outside entity to look out for her needs.
What kinds of outside entities are there that do things like look after the needs of an adult child? Or even a fully functioning but isolated person without reliable living family? I think a lot of kinds of situations could find it useful. Besides guardianship and conservatorship, a trust and a trust company leap to mind of course, but are there others?
jackrabbit14
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Re: Buying House for Adult Child

Post by jackrabbit14 »

Purchase a small townhome and lease it to her with an option to buy.

That way, you can find out her commitment and you control the investment.
Zagnificent
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Re: Buying House for Adult Child

Post by Zagnificent »

Oddlot wrote: Tue Nov 23, 2021 8:45 am I am fully retired and my wife works part time, both in our 70's. SS covers about 60% of our current expenses; no pensions. Our adult only-child lives with us and works part time, wants her own house, but is not close to having the money. Our retirement portfolio is in the lower 7-digits. We live in a higher cost state, but not California. She would not tolerate a roommate.
Our first thought is to cover the purchase price less any financing she can get and hold her accountable for expenses, but frankly, that will be a stretch for her. There are some acceptable houses in the $250K range in our area. The market in our area is tight so prices have been rising.
Has anyone bought a house (or helped buy one) for their adult child and have any wisdom to relate? Did you work with a financial adviser? Any comments would be appreciated.
I'm 32, and my parents helped me to purchase my first home. However, I think my situation is markedly different from what you've described with your adult (child). I can't help but read into how you've phrased a few things, and it's not entirely flattering toward your child (in red). Based on that alone, I'd be very wary about pursuing this further or creating any degree of entitlement that is absent financial responsibility on the part of your child. Certainly do not co-sign on a loan for them.

In my case, I was working full time and in the early stages of a now lucrative career. I was at the time making $130k/yr, I had just finished a post-doc Fellowship, and I was in a city where the costs of living and the cost of housing was rapidly increasing (Austin, TX). When I decided to pursue purchasing a home, I was cash poor on the account of aggressively paying down my $130k student loans, which I conquered in under 4 years. My parents were open to investing in the cost of the home by covering the down payment, so I did some research, took the initiative, and met with a real estate attorney to legally create a document that reflected their interest in the home with a private loan that included no monthly payments, and had their equity in the property proportional to the the initial purchase price of the home (approx 20%). Immediately upon the sale of the home, I would owe them that percentage of the appreciated sale price of the property.

It sounds like my situation (that of an 'investment loan' with no term or repayback structure) is a bit different than what you're envisioning. I might suggest you consider something like this...or a rent to own situation with your child instead of just "buying them a home." Having some sense of human nature, I worry that your child might not appreciate or respect the tremendous gift you're providing them if it is just "given" to them. If I were in your shoes, I'd go the rent-to-own route, with a contract explicitly requiring them to make on-time payments to you, to maintain proper upkeep of the home, to pay all bills, and to refrain from any behavior that could jeopardize their ability to maintain a positive financial future (e.g. hard drugs, etc). If you can't trust your child to be able to fulfill that sort of contract, then I suspect giving them a home would not be a wise idea.

Just my thoughts, and I mean no disrespect if I've read-into your comments inappropriately.
DarthSage
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Re: Buying House for Adult Child

Post by DarthSage »

AnnetteLouisan wrote: Sun Nov 28, 2021 2:09 pm
DarthSage wrote: Sun Nov 28, 2021 9:33 am Another vote for renting, to test the waters.

It doesn't sound like your daughter is in a place to manage home ownership--paying the taxes and other bills, fixing whatever problems crop up (leaky faucet, dead furnace, etc.), or regular home upkeep.

I understand where you're coming from--I have a 24yo son with autism, anxiety, and depression. He currently works full-time and goes to school part-time (high functioning, obviously). We don't think he'll ever be able to leave far from a caring family member. We're cautiously optimistic that he'll one day live on his own. Luckily, he has siblings who are wiling to pitch in. He also has some money left to him by his grandmother, that could be used to purchase a condo or townhouse (probably a better choice for him--no outside chores).

A frank discussion with an estate attorney could help you navigate this--perhaps a special needs trust, maybe an outside entity to look out for her needs.
What kinds of outside entities are there that do things like look after the needs of an adult child? Or even a fully functioning but isolated person without reliable living family? I think a lot of kinds of situations could find it useful. Besides guardianship and conservatorship, a trust and a trust company leap to mind of course, but are there others?
I know that there are social services available in the city we live in. While I haven't personally investigated to see what they offer, I know some special needs adults who are in programs here.

In our case, our oldest (26) has said that she expects to take care of her brother one day. Problem is, she lives 800 miles away in Boston--I don't think he'd want to live there. Our 2 younger children are still forming (ages 18 and 15), so we don't know where they'll end up. We're also younger than the OP, so it's less immediate. We're thrilled that our son is holding down a job, pay us nominal rent, getting himself to and from school, etc. He still has many struggles, however--I'm not convinced he'd eat a healthy diet or make a dental appointment without me.
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