Not sure if this is the right thread to post this, but it seems to fit.
Mulling over the scenario not of gifting a down payment or purchase for a kid, but purchasing a property and having our kid and a roommate rent it out from us.
Positives for us would be likely a big tax write off (we have income from another property venture and I can also get qualified as a real estate professional), plus the bonus of a (hopefully) appreciating property. Also having a nicer place when we come to visit instead of staying at a hotel, though a hotel would be tax deductible, I think, along with airline tickets.
Positives for our son would be not getting jerked around every time the lease came due, having us as his property manager and he could also do work on the place, not having to try to get out of a lease if his roommate wants to leave, and getting a larger place. I know they would have to pay market rate rent for us to treat this as a rental.
When it’s time to sell, we would split the profit between him and his brother. But a huge unknown for me is if this is even remotely affordable, since it would be in Brooklyn or Manhattan. If it’s 2 million for a one bedroom condo in a bad area, forget it!
One initial thought is would your son, AND the roommate, be comfortable with you staying there when you’re in town? Would you get at least a 3 BR?
Does he have any interest in this idea, and/or will it make him feel at all “trapped” (as in what if he makes a job change, for example).
What would you do with the place if your son no longer wants/needs to live there?
We would likely not want to stay there if he had a roommate. Definitely wouldn’t get a 3 bedroom (though would love to), as I’m sure that would be unbelievably expensive.
I haven’t talked to him about this yet, just mulling it around in my mind. I would definitely highlight that it would have to be somewhere with good appreciation/resale/rental possibilities, because I absolutely don’t want him to feel trapped. I don’t think we’d do this unless he jumped at it (and he’d be crazy not to, I think). He is very planted in NYC, but you never know.
Thank you, @oldmom4896. Good grief, even a house in that area is much more reasonable than I thought. I tried to get him to check out that area before, when you told me about it, but he thought it was too far of a commute from the city. But honestly, is it really? He needs to closely look at how difficult it is to commute. I understand not wanting to spend time on the subway, but it doesn’t look that bad on a map. Then again, what do I know!
I don’t have experience with this, but I have a friend who was a Realtor who bought a house for her dd to live in when she went to college. The dd was in a sorority so she got sisters to move in with her, and it’s become a place that gets handed down in the sorority year after year so there never was an issue of having tenants, even after the dd graduated.
I just came back from visiting ds2. Dh and I stayed in an Airbnb. That definitely was the most expensive part of the visit. I wish he had a big house like his brother so that we would have a place to stay. He is itching to get in a house but can’t afford it. Could we give him money for a down payment? Sure. But I don’t think that’s wise for him right now. He’s still in his 20s. If I had to put money on it, I’d say that he’s there for good … or at least long enough to make the investment make sense — but I don’t have to put money on it so won’t.
I did this for my brother when he was in medical school. Worked out for both of us along the lines you outlined. Cashflow was about neutral between rent vs mortgage, condo fees and upkeep, and I got a nice return on the appreciation on the sale. On the other hand, this was Ann Arbor, not Manhattan, and it was a nice apartment complex within walking distance of the University with little risk of me not being able to resell it.
I looked at this recently for my daughter who lives in LA. The numbers did not pencil. If I charged them “market” rent and only put 20% down, with property tax and HOA, I would be severely cash negative and any return would have to be realized on the sale. I suspect, the economics are similar if not worse for Manhattan.
I wonder, though, what if interest rates keep coming down, if he can get a low down payment loan and find a house at a reasonable price? If you think he’ll be there forever, maybe it would be a good move if he wants to do it. I bought my first house at 23 for 56K. Lovely little house, but it turned out to be a money pit as we were military and had to move, and I was suckered by sleazy realtors talking me into not getting a release of liability for a VA loan. Guess it can go either way!
That was awesome that you did that for your brother, how kind of you!
I suspect the numbers won’t work out, particularly when looking at HOA fees, some of them are 2-3K/month. Crazy. Depends a lot upon interest rates, I think.
Express buses go directly to lower Manhattan and midtown. Less than 45 min on the subway.
Yesterday I went on the subway from Penn Station to Clinton Hill, Brooklyn in 25 minutes. Bay Ridge is further but another neighborhood to explore is Sunset Park, north of Bay Ridge.
Co-ops are a pain unless you like strict controls on apartment dwellers/owners. Oftentimes, co-ops have significant underlying debt where the real property is under a mortgage, so it is critical to review the co-op’s financials as to its ability to service any underlying mortgage as well as cover on-going operating costs. I saw one really beautiful co-op in the heart of Greenwich Village at a “bargain” price, until I saw that the co-op actually had a land lease that was going to expire within 5 years. Not such a bargain. Condo’s are real property, so they are more straight forward to get in and out of.
Each coop has its own rules. Many prohibit subleasing and require owner (and family) occupancy most of the time. A good real estate agent can be extremely helpful. I know one who works mostly in southern Brooklyn and I can get recommendations elsewhere in NYC. The big agencies (Corcoran, Brown Harris, Compass, etc. have people very familiar with each neighborhood. I have a good friend who was an agent for Corcoran for many years (left NY because of husband’s new job) and would be happy to inquire.
That squares with what I thought from @oldmom4896’s link. Guess sometimes what looks like a deal sure isn’t. I don’t think I’d like the restrictions and invasive nature of a co-op, then again if condos are crazy expensive, maybe that’s not doable either.
@busdriver11 - D and SIL lived in Bay Ridge for 4 years. Nice, pretty safe neighborhood. She worked in the city the entire time (he did off and on) and commuting was not an issue. There was good public trans. She took a bus to Manhattan.
We bought a rental during the last market downturn that our son rents from us. We looked at it as an investment property but as soon as I saw it I suggested offering it to our son. Even if he hadn’t moved in we would have bought it. He is still in the house living with his wife and child. He pays below todays market rent as we have never raised it. The plus for us is that he has a place to live in our area that he can afford. As you said it’s great for them to not be at the mercy of the rental market or having to move. Down the road we have several,options, gift it to him, sell it to him or just let him live in it till we pass away with the understanding that it’s part of his inheritance. Tax wise that is the smartest move. In the meantime any improvements they want to do are on them as the house will one day be his. Obviously if they ever wanted to move they are free to do so. We would just rent it to someone else.
I have a friend who owns rentals in two different cities where her kids live. They have roommates who pay rent. I think her kids don’t pay much as the “manage” the houses.
