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Best tax approach for multi-family living
Old 08-26-2012, 02:26 PM   #1
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Best tax approach for multi-family living

Our daughter and son-in-law have asked us to share a home with them. He is from a country where living with parents is the norm. Right now, we live in different cities across the country. When our daughter selects a job location, we will all move to the city and will locate suitable housing. It is uncertain how long her job will last at this location but we are confident that it will be for at least 2 years. As we are thinking about it now, we will share all household expenses and we will find a home well within our financial abilities as we are also trying to save money by doing this.

I want to determine the best tax approach for structuring our living arrangement. We could do any of the following and perhaps there is an idea that you may have:

- Purchase a house 50/50
- One couple purchases a house and rents to the other
- Share rent 50/50

Additionally, our children will likely have two to three times our earned income. We will have dividends and capital gains but probably at a low level since we are not required to sell stock to meet our expenses.


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Old 08-26-2012, 02:45 PM   #2
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Parents living with adult children is not the norm in the US but it is in many other countries. Our adult children lived with us and we found it enjoyable. There were no grandchildren, though.

Your horizon is short. Two years isn't long enough to justify buying and then selling to move. The important questions are how long you expect the kids to be sharing home with you, and then, when they do move out, where you plan to live. Generally speaking buying vs renting will only favor buying when you are ready to commit to a long term in the same location. Seems to me the most straightforward approach is to rent and share household expenses 50/50. Also, clear rules everyone agrees to with regard to "rights and responsibilities".

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Old 08-26-2012, 02:47 PM   #3
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I don't have any advice on the best tax approach to this situation.
I just wanted to share that multi-family/multi-generational living can work very well.
My in-laws live in a detached granny flat cottage we built for them, part of the year. We don't charge them rent since we're doing this to provide support in the care of my father in law (mobility issues, cognitive issues due to strokes, a botched broken hip surgery, etc.).
I love that my kids have close, day to day, involvement with their grandparents.
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Old 08-26-2012, 03:28 PM   #4
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I'm in camp with MichaelB. If you know you might only be in that local for two years, why go thru the expense of buying and then having to sell again in two years. I'd be renting for sure and share everything 50/50. Are we talking duplex or a large house that would accommodate everyone? PS. No tax problem.
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Old 08-26-2012, 04:48 PM   #5
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Not sure of the living arrangements. We know that our children would like a yard. Beyond that, all options are open.

We have taken a roommate at our current home. We had been investigating cooperative living to reduce waste and expense. We did not design this opportunity as a test but it seems like it will work that way. So far, it is working out. Like all roommate situations, it depends on the people involved. So far, so good.

I appreciate the comments so far.
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Old 08-26-2012, 04:58 PM   #6
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One more vote for renting, for a number of reasons:
1) New area, you might need to learn where you want to be before committing to buying. Some people rent 6 months before purchasing.
2) Possible short-term stay favors renting over buying due to closing costs, realtor costs of selling, not to mention that it may not be easy to sell right away
3) Test that living together will work before committing, though it sounds like you have a good idea of what you are doing.

If you bought, tax wise it seems like it'd make more sense for the higher income person to take the mortgage write-off.
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Old 08-26-2012, 09:41 PM   #7
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Originally Posted by MichaelB View Post
Two years isn't long enough to justify buying and then selling to move.
The costs from just selling a house (realtor's commission) and the closing costs of the mortgage could very well be enough to pay for 2 years worth of rent. And that's before adding in moving costs, real estate taxes, higher utilities, higher homeowner's insurance, etc.

Don't really understand why you're looking to go to this extent for 'helping them' for 2 years. I understand there may be a family 'benefit' by being with your child....but you aren't currently at each other's throats enjoying this arrangement.

I'd be interested in seeing if you have taken into account all of those expenses listed above (and then some). If so, what is your anticipated net cost for doing this?
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Old 08-27-2012, 06:28 AM   #8
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@ Moorebonds - We are looking at this arrangement as a way of living closer to family and in terms of cooperative living choice. We recognize the upfront investment which we hope is mostly moving costs. We think we can sell our house by owner. But if not, it would be part of the'personal' investment (in other words, not expecting a financial return but a social one) for moving closer to family.

Once we have executed our upfront costs, we are hoping to save monthly expenses. Unless, I am missing something, the sharing of a house expense (rent, repairs, tools, utilities, etc) as well as needing only one car for the four of us (we all ride bicycles year around) should reduce monthly expenses. I will be surprised if we do not find more savings vs. higher costs from this arrangement.

While I did not provide all the reasons for this arrangement in my initial post, it will be helpful to all of us beyond the family closeness and finances. We plan to travel as do our children for periods of time that would require house sitters. We have been considering selling our house and getting a rental so we could simply lock the door and not worry about frozen pipes or other such mishaps. This arrangement with our children will make it easy for all of us to pick up and go and have the piece of mind that everything will be managed.

I appreciate your response to my question (as well as everyone else) as it helps me to to think through this important decision.
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Old 08-27-2012, 09:47 AM   #9
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Originally Posted by RunningBum View Post

If you bought, tax wise it seems like it'd make more sense for the higher income person to take the mortgage write-off.
+1. That's the only thing I can think of.

I think the multigenerational living should be an interesting experience. I enjoy having my parents stay with me when they visit, and we do the same with our son since he has the space. For just two years though, renting does sound better.
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Old 08-27-2012, 10:53 AM   #10
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I envy you that you can do this. I have long believed that family co-living is a superior option to living separately. Unfortunately, my parents mental illness makes this impossible for me (both parents are hoarders plus other problems). It could have worked with my in-laws, but they had no interest in living in the big city (they lived in small town USA) so it was never explored, and they died young (48 and 63) before age and infirmity might have made it a desirable option.

Edit: I vote for renting because of the very short time period you are expecting to stay. As others have stated, too much money to buy and sell in two years.

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