9

If 2 people decide to invest in a house, but only 1 of them wants to live in the house, should the interest only monthly mortgage payments be:

  1. split 50/50,
  2. the person living there pays 100%
  3. the person living there pays 100% plus rent to the other owner
  4. the person living there pays 50% plus rent to the other owner
  5. or something else?

Basically, what would be standard to keep the shares equal, and which of the options would change share values?

EDIT- Further details:

Assume I move out, the house is on interest only mortgage payments, i.e. the mortgage is not being paid off, only the interest is being paid off. Assuming the mortgage is 600pm and the rent for the whole house is 700pm. If I moved out, does that mean I pay 300pm towards the mortgage, I receive 350pm for rent, and I don't pay any bills for the house as I am not living in there.

23

To start out with, suppose you have three people: A and B own a house and rent it out to a third person C. In this case C pays rent and A and B each receive or pay (rent - mortgage) / 2, depending on whether the rent covers the mortgage.

Your situation is identical, except that B and C are the same person. So the person not living in the house receives or pays (rent - mortgage) / 2 and the person living in the house covers the remainder.

I hope you can agree on a reasonable rent. :)

  • 3
    Great illustration with the B & C being the same person. – Nicole Feb 15 '11 at 17:31
  • 6
    Just make sure you get it all down in writing up front. (See this question. I think you'll want two separate contracts: (1) a "partnership" or similar agreement for your joint purchase, and (2) a lease between the person who will live there and the "partnership". Especially important in such an agreement will be how you terminate the partnership: buyout, forced liquidation, etc; and what the triggers for a termination will be. – bstpierre Feb 15 '11 at 18:47
  • Added further details to the original question. – oshirowanen Feb 16 '11 at 9:11
  • I am person A in an identical scenario, and it's worked perfectly. – G__ Feb 19 '11 at 4:03
2

This can be as complicated as you'd like to make it. First, what was the downpayment? That has to come into play, right? The interest may be far more than the going rent or far less. I'd think without any other detail, it's 50/50, and the owner who is out can sublet a roommate. To better show this, what if the house were paid in full? The absentee owner should get rent, no?

It starts with knowing the rental value.

Edit - to your updated detail - yes, your numbers are correct. The tenants should pay all utilities but the absentee landlord should pay half of any maintenance. Exterior paint, windows, roof repair, boiler. The list of potential things that may need repair is lengthy.

  • Added further details to the original question. – oshirowanen Feb 16 '11 at 9:12
0

It depends on who you are.

If you are the person living there, you'll want 50/50. If you are the absentee, you'll want 50/50, plus rent and minus expenses.

  • Added further details to the original question. – oshirowanen Feb 16 '11 at 9:12

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