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my sister would like to purchase a property for my ageing mother to live in. The property is $168K, she is putting $80K down (30 year fixed) leaving us with a $1K monthly payment (P&I, HOA, Taxes, etc.). She would like for my mother to pay her $500/month (as a tenant) and has asked me to contribute $250/month while she would contribute $250/month to close the gap. After proposing the idea to me, she mentioned that she doesn't think that I would be owed a percentage of the sale since she is the one "taking the risk" of owning the property. I however I that believe I should be entitled a percentage of the final sale based on what I have contributed. Is there a way to better explain this concept to my sibling or am I missing something?

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  • You've used the jointly-held-property tag but it sounds like your sister would own the property solely, is that correct?
    – Hart CO
    Jul 25 at 4:14
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    One missing piece of the puzzle - You mention HOA. This implies there are similar units in a complex of some sort. What is the going rent for those units? If I am mistaken, any idea what this place would rent for, the fair price, to a stranger. Jul 26 at 12:33
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    @Freiheit Putting less money down results in a smaller monthly payment?
    – chepner
    Jul 26 at 13:40
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    Possibly; I think it depends (somewhat morbidly) on how long you anticipate the mother being the tenant. The liquidity will come at the cost of having to pay more interest per month over time. The less time between purchase and resale, the less interest you'll have to pay.
    – chepner
    Jul 26 at 13:55
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    @Freiheit HOA's and tax rates vary wildly, I've seen a lot of condo's in ski towns where the HOA dwarfs the mortgage (assuming 20% down payment). Guess we don't know what else is in 'etc' though.
    – Hart CO
    Jul 26 at 15:56
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She would like for my mother to pay her $500/month (as a tenant)

That is the key.

has asked me to contribute $250/month since she is the one "taking the risk" of owning the property

What she is really saying (whether she knows it or not) is that she wants her mother to rent the house for $1000/month, and for you and your sister to pay half of your mother's rent.

With her name alone on the property, she's the landlady who really is taking all the risk: repairs, yard work, paying taxes, etc on time.

You, not being the landlord would not be corralled into helping your sister perform any of the work that she is taking all the risk on. Remind her of that.

And then consider whether you'd help your mother pay her rent if the landlady was a complete stranger.

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  • Thanks so much - I really appreciate this perspective. If I put in money for the down payment, would this entitle me to some sort of ownership/partnership? Jul 25 at 22:10
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    @RaeKennett you're making this simultaneously too complicated and not complicated enough... the only "thing" which makes you "entitled" to "some sort of ownership/partnership" is your name on the TITLE". (That's why the title in "entitled" is the same as the title you hold showing your ownership.)
    – RonJohn
    Jul 25 at 22:43
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    @RaeKennett thus, you'd have to go into a partnership with your sister, get lawyers involved, hammer out an agreement, pony up some cash, take a stake in the responsibility of running the partnership. Depending on you and your sister, it could run very smoothly or... be a complete disaster that destroys the family.
    – RonJohn
    Jul 25 at 22:47
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    @RaeKennett Jointly-buying this property with your sister would probably be a mistake. There are so many things that can go wrong that can strain the relationship with your sister. Help your mother with her monthly rent if you are willing and able, and if you want to make a financial investment, there are much better places to do so than jointly-owned real estate. +1 for this answer. Jul 26 at 13:14
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The best way to look at it: Imagine it wasn't your sister buying the house, but a total stranger. So some stranger takes $80k of their own money and an $88k mortgage to buy a house, then they rent it for $1000 a month to your mother. Since your mother doesn't have that money, she pays $500 a month, and your sister and you pay $250 each.

Would you agree to that deal? You either do or you don't. If you don't, what deal would you agree with? Obviously you won't get any part of the house, since some stranger owns it. If you agree, the fact that your sister wants to be that stranger makes no difference.

Or let's say your sister buys the house and rents it out for $1,000 a month to a stranger. You wouldn't expect any share of it, would you? Your sister spent $80k of her own money, has a mortgage that she needs to pay back with interest, and has to look after the house. You are giving $250 to your mother to help with the rent, as does your sister. Why would you expect any part of the house? You're not actually contributing, you are giving some money to your mom.

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Your sister is taking on more risk so it makes sense that she get a more substantial share of the gain.

There are a lot of other questions to ask. Who is paying for repairs/insurance/new appliances/etc? There are also contributions that aren't financial (time/energy for DIY repairs or effort in dealing with contractors/shopping for new appliances, etc). When things aren't split evenly it gets more complex. Figuring out the net value of all individual contributions over multiple years will be a giant headache.

Any arrangement where you co-own the rental will be tricky to navigate, you'll need to make a bunch of decisions up front about where responsibilities lie, and most likely even if you do a great job of that one party will feel like they got the worse deal down the road and strain your relationship.

Personally, I have no interest in getting into business with family. If you can comfortably afford to contribute $250/month and would be happy to do so if the landlord weren't your sister then do that with no strings attached.

If that's more than you are comfortable giving away then you could pitch it as an interest-free loan to your sister. She is the landlord and takes on all those risks/responsibilities, you pay $250/month while your mother lives there and when your mother no longer lives there you get paid back, either lump-sum when the house sells or monthly if it remains a rental. This doesn't benefit you (you're sacrificing growth of your money over time/buying power now), this is you helping out family without giving too much away.

If you do get involved with ownership or with some plan to be paid back then ensure that the agreement is very clear and thorough (preferably with a lawyer's blessing).

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The bottom line is there is no "fair" in this case. You are not obligated to contribute to your mother's living expenses or is your sister. However, either one of you may choose to do so out of the goodness of your hearts.

Depending upon the actual age of your "aging" mother a home may not be a good idea. It may be a very short lived affair if mobility becomes an issue.

The crux of the issue is that you sister may profit from this transaction. If you two rented an apartment for mom, contributed a similar amount each, neither of you would profit. The investors of said apartment would profit, but there is less emotion tied to that fact then if your sister purchased a property and profited in the future. This even though your financial contribution might be the same in both cases.

So there are lot of things to weigh in this situation. In the end, if you are to share in the proceeds of the house sale, make sure you get it in writing. That document will have to cover all contingencies including if your sister needs to sell the property "early".

So yes I think there are things you are missing:

  • How sustainable is it for mom to live in a house on her own?
  • Am I being unreasonable in allowing my sister to profit from a transaction I would have participated anyway?
  • Once we arrive at an agreement we need to have it in writing.
  • Have all contingences been covered in that agreement?
  • How much am I willing to contribute to my mom's living expenses?
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If (and only if) your sister wants to become a landlord, then she can buy the house however she wants, and rent it to whoever she wants (presumably your mother, in this case). She should charge the tenant (your mom) a fair market rent. I hope your sister is considering all of the other expenses and aggravation that go along with being a landlord like taxes, insurance, repairs, etc.

Meanwhile, you and your other siblings might want to help may some of your mom's monthly bills, like rent, which you can sort out like anything else. Does it make sense for you and your sister to each give your mom $250/mo? That's up to all of you. But I wouldn't attach it to anything specific. I would just give her the cash each month and she can do what she wants with it.

TBH - I think it's MUCH better for your mom to pick somewhere that she wants to rent that has nothing to do with your sister. And if your sister wants to buy a rental and become a landlord, she can do that on her own and not have your mom live there. Little to gain, and much to lose (family wise), by combining the two.

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