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Hypothetical question:

Jonathan and Anthony own a triplex 50-50.

If Jonathan is currently living in 1 of the 3 apartments of a triplex, Anthony is living in the other apartment unit and they do Airbnb in the third apartment for income.

They are both currently splitting all costs of the building 50/50, including heating, electricity, property taxes...

Jonathan then bought a home for his family and he'll be moving into the new house. Anthony will be moving into Jonathan's apartment unit and they will be renting out Anthony's unit. So in total, there will be 2 of 3 units rented, and him living in one. Jonathan will not be living in this building anymore.

The question: Let's say, hypothetically, they made 2400$/mo in rental income from the 2 apartments, had an expense of 2100$/mo for the entire building. Anthony is living in one apartment unit and Jonathan is living in his new house. How do you calculate what is right for both of them? Do you just split 150$/mo (2400-2100=300/2=150)? How do you get the correct calculation?

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You're ignoring the fact that your brother derives value from living in the apartment. Fair to me in your situation would be:

  • Split costs as before
  • Split rent on the one unit as before.
  • And you get the majority of the rent on one of the units, as you used to get that value by living there. I'd say it's less than 100% of the unit's rent because it's likely that your brother will be doing more work as an onsite landlord. But then maybe his use of utilities equals it out -- tough to say exactly.

Another way to look at this is decide what a "fair" rent for the unit your brother is in. Then have your brother pay that into a rental pool that you both split equally.

Using your numbers, assuming the units are equal[*]: $2400/mo on two units, means the total rental value for each unit is $1200 or $1200*3 = $3600 from the whole building.

You then split the $3600 in rent ($1200 from your brother + $2400 from other tenants,) so you each receive $3600/2 = $1800. You each then pay $1050 out of that rental income for your costs, each receiving $1800 - $1050 = $750.

That means you get $750, and your brother does too. Effectively he gets to live in a $1200 apartment for only $450/mo.

Or as I said, perhaps you take into account that there are services rendered by your brother living onsite, so you split the rental income so he gets $2000 and you get $1600. Then he gets to live in his $1200 apartment for $250/mo and you get $550/mo.

And next time you go into a real estate share, discuss this in advance. :)

*I assume they're not quite equal if your brother is going to move into your unit, and perhaps you take that into consideration in the split

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    "Another way to look at this is decide what a "fair" rent for the unit your brother is in. Then have your brother pay that into a rental pool that you both split equally." This. Anthony should "rent" his apartment from the partnership.
    – RonJohn
    Feb 8 '21 at 20:00

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